Ride the Crude Rally With These 3 Promising Energy Stocks
Oil prices have entered a bullish phase, recently reaching a two-month high, capturing significant investor attention. This upward trend indicates a strong and sustained interest in the energy sector, suggesting that energy companies are poised for substantial growth. With oil prices anticipated to remain stable throughout the year, the outlook for these companies appears highly promising.
High Oil Price
West Texas Intermediate (“WTI”) crude price is trading at more than $80 per barrel, which is highly favorable for exploration and production activities. WTI crude recently touched $83.38 per barrel, the highest mark since Apr 26.
Also, in its short-term energy outlook, the U.S. Energy Information Administration (“EIA”) projected the average spot price of West Texas Intermediate crude at $79.70 per barrel this year, still favorable for upstream operations.
Oil prices remain bullish due to the potential for solid summer fuel demand, depleting inventories and tightening commodity supply. Additionally, concerns over Middle East tensions and the consequent risk of reduced global oil supply are contributing to the sustained upward pressure on prices.
Which Energy Stocks to Gain?
High oil prices favor oil exploration and production activities, raising the demand for oilfield services. Oilfield service providers assist upstream companies in efficiently setting up oil and gas wells, benefiting from the heightened activity in the sector.
Employing our proprietary stock screener, we have zeroed in on three leading energy stocks, Chevron Corporation CVX, SLB SLB and SM Energy Company SM, that are well-poised to capitalize on a promising crude pricing environment. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chevron generates most of its earnings from its upstream operations. The integrated energy giant has a strong foothold in the Permian – the most prolific basin in the United States – where a significant portion of the energy major’s acreage has minimum royalty payments. Thus, CVX will generate handsome cashflows through its upstream business, banking on handsome oil prices.
In addition to maintaining disciplined capital spending, Chevron has a strong balance sheet, providing a solid foundation to rely on during unfavorable energy market conditions.
To expand its premier asset portfolio, SM Energy recently agreed to acquire 80% of XCL Resources’ oil and gas assets in the Uinta Basin for $2.04 billion. The value-driven acquisition, likely to close in September this year, will increase its inventory of net locations and boost its oil production. SM Energy is also committed to maintaining its strong balance sheet, which it can rely on during low oil prices.
SLB, via its Well Construction business unit, offers products and services aimed at enhancing drilling efficiency and optimizing well placement and performance. As rising oil prices stimulate exploration and production activities, the demand for Well Construction services is expected to grow, positioning SLB to benefit significantly.
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Chevron Corporation (CVX) : Free Stock Analysis Report
Schlumberger Limited (SLB) : Free Stock Analysis Report
SM Energy Company (SM) : Free Stock Analysis Report
