Oil Stocks Set to Reap Huge Benefits from Undersupply Regime (PXD, CEI, MTDR, FANG, HP, HES, OIH, XOP)

With the beginning of a coordinated campaign of strategic petroleum reserve releases and the threat posed by the new Omicron variant of Covid-19, traders have piled into oil shorts on the expectation of a pick-up in supply and a hit to demand.

However, the cyclical fundamental problem of a lack of incentive for new oil production has only worsened, leading top analysts in the oil space to only increase their price targets on concerns about a decline in structural supply as producers appear set to see less and less reason to invest in new production capacity.

It’s a virus alright – a virus of undersupply in the oil space. And it is set to intensify.  With that in mind, we take a look here at a few of the most interesting stories in the crude oil space.

Pioneer Natural Resources Co. (NYSE:PXD) operates as an independent oil and gas exploration and production company. The firm engages in hydrocarbon exploration in the Cline Shale. 

It focuses in the operation of Permian Basin, Eagle Ford Shale, Rockies, and West Panhandle projects. 

Pioneer Natural Resources Co. (NYSE:PXD) recently announced third quarter net income attributable to common stockholders of $1.0 billion, or $4.07 per diluted share. These results include the effects of noncash mark-to-market adjustments and certain other unusual items. Excluding these items, non-GAAP adjusted income for the third quarter was $1.1 billion, or $4.13 per diluted share. Cash flow from operating activities for the third quarter was $2.0 billion.

CEO Scott D. Sheffield stated, “Pioneer continues to execute at a high level, delivering another strong quarter and generating record quarterly free cash flow1 of $1.1 billion. Our peer-leading distribution framework will result in returning approximately 80% of third quarter free cash flow, or approximately $880 million, to shareholders through our base and variable dividend payments in the fourth quarter of 2021.

If you’re long this stock, then you’re liking how the stock has responded to the announcement. PXD shares have been moving higher over the past week overall, pushing about 4% to the upside on above average trading volume. 

Pioneer Natural Resources Co. (NYSE:PXD) managed to rope in revenues totaling $5B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 167.2%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($775M against $4.5B, respectively).

Camber Energy Inc (NYSE American:CEI) has exposure to oil and gas assets through its majority-owned subsidiary, Viking Energy Group Inc (OTC US:VKIN), which has energy assets located in North America in Kansas, Missouri, Texas, Louisiana, and Mississippi.

However, this one is also interesting for two additional reasons: First, it has become something of a meme stock, rising several hundred percent higher earlier this year on retail trader enthusiasm; and second, it has recently found material exposure as a cross-over play with real promise as a sustainable energy stock.

Camber Energy Inc. (NYSE American:CEI), to highlight this latter point, most recently announced that, on November 18, Viking entered into a Membership Interest Purchase Agreement to acquire a 100% interest in a group of companies that are in the process of engineering, developing, constructing and bringing into commercial operations a processing plant located in Reno, Nevada, which is designed to produce renewable diesel. 

According to the release, the estimated production capacity of the Plant once operational is 43,000,000 Gallons per year. The main part of the Plant is 95% complete and there is a pre-treatment unit under construction within the Plant that is 30% complete. Renewable diesel fuel, sometimes called green diesel, is a biofuel that is chemically the same as petroleum diesel fuel, and is produced through various thermochemical processes such as hydrotreating, gasification, and pyrolysis. Renewable diesel is made from renewable feedstocks instead of crude oil. 

This follows the company’s announcement this fall of the Exclusive Intellectual Property License Agreement with ESG Clean Energy regarding ESG’s patent rights and know-how related to stationary electric power generation, including methods to utilize heat and capture carbon dioxide.

Camber Energy Inc. (NYSE American:CEI) has been heavily shorted, with more than half of its recent trading sessions in VKIN dominated by more than 40% short transactions, according to OTCshortreport.com. Given the sharp rebound in oil prices over the past week – oil is up more than 10% in that time – those shorts could quickly find themselves on the run as the retail trader contingency crowds back in on the back of both core and alternative revenue stream potential.

Diamondback Energy Inc. (Nasdaq:FANG) is an independent oil and natural gas company, which engages in the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves. It operates through the Upstream and Midstream Services segments. 

The Upstream segment focuses on the Permian Basin operations in West Texas. The Midstream Services segment involves in the Midland and Delaware Basins.

Diamondback Energy Inc. (Nasdaq:FANG) recently announced a series of leadership changes. Russell Pantermuehl, currently Executive Vice President and Chief Engineer, will retire from his current role at the end of 2021 after having worked at Diamondback since August 2011, prior to the Company’s initial public offering. Russell and the Company have agreed that following his retirement he will serve as an advisor to Diamondback through December 31, 2022 in a limited role.

Al Barkmann, currently Vice President of Reservoir Engineering, has been promoted to Senior Vice President of Reservoir Engineering, and will assume many of Russell’s prior responsibilities, reporting to Danny Wesson, EVP of Operations. Also, Yong Cho, currently Vice President of Drilling, has been promoted to Senior Vice President of Drilling and will continue reporting to Danny. These changes are effective immediately.

“I would like to express my sincere gratitude to Russell for his significant contribution to Diamondback over the past decade. His legacy of technical excellence and character will leave a lasting impact on the Company. I have had the privilege of working with Russell for multiple decades and have witnessed firsthand his influence on the oil and gas industry over a 40-year career. He has had a significant positive effect on all those he has worked with and has been a mentor to countless individuals. I wish him all the best in his retirement and look forward to his continued contributions to Diamondback in his new role,” stated Travis Stice, Chief Executive Officer of Diamondback.

And the stock has been acting well over recent days, up something like 8% in that time. 

Diamondback Energy Inc. (Nasdaq:FANG) pulled in revenues totaling $1.9B – a figure that represents a rate of top line growth of 165%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($475M against $2B, respectively).

Other key names in the Oil space include Matador Resources Co. (NYSE:MTDR), Helmerich & Payne Inc. (NYSE:HP), Hess Corp. (NYSE:HES), VanEck Oil Services ETF (NYSEArca:OIH), and SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca:XOP).

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Published by Brendan Byrne

While studying economics, Brendan found himself comfortably falling down the rabbit hole of restaurant work, ultimately opening a consulting business and working as a private wine buyer. On a whim, he moved to China, and in his first week following a triumphant pub quiz victory, he found himself bleeding on the floor based on his arrogance. The same man who put him there offered him a job lecturing for the University of Wales in various sister universities throughout the Middle Kingdom. While primarily lecturing in descriptive and comparative statistics, Brendan simultaneously earned an Msc in Banking and International Finance from the University of Wales-Bangor. He's presently doing something he hates, respecting French people. Well, two, his wife and her mother in the lovely town of Antigua, Guatemala. You may contact Brendan via his email (brendanbyrne@wallstreetpr.com) or his Google+ page (https://plus.google.com/u/0/116608759701551457422).