Oil Prices Surpass $100, Energy Stocks Benefit
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 days ago
0mins
Should l Buy DVN?
Source: NASDAQ.COM
- Surging Oil Prices: West Texas Intermediate crude oil has surged past $100, with Brent prices nearing $126, approaching record highs, which is expected to enhance the profitability of U.S. energy producers.
- Producers' Advantage: Devon Energy and Diamondback Energy, as key operators in North America, are poised to benefit from rising oil prices, with both companies trading at a forward price-to-earnings ratio of approximately 10, indicating relative attractiveness compared to the broader market.
- Market Response: The escalating tensions between the U.S. and Iran in the Strait of Hormuz have prompted U.S. energy companies to ramp up production to buffer supply shocks, with expectations of increased investment flowing into the Americas in the future.
- Investment Advice: Given the likelihood of oil prices remaining above $100, investors should consider stocks of Devon Energy and Diamondback Energy, although market volatility is expected, these companies may represent solid long-term investment opportunities.
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Analyst Views on DVN
Wall Street analysts forecast DVN stock price to fall
20 Analyst Rating
18 Buy
2 Hold
0 Sell
Strong Buy
Current: 51.260
Low
41.00
Averages
45.53
High
55.00
Current: 51.260
Low
41.00
Averages
45.53
High
55.00
About DVN
Devon Energy Corporation is an oil and gas producer in the United States with a diversified multi-basin portfolio headlined by an acreage position in the Delaware Basin. The Company is primarily engaged in the exploration, development and production of oil, natural gas and natural gas liquids (NGLs). It owns a portfolio of assets located in the Delaware Basin, Rockies, Eagle Ford and Anadarko Basin. The Delaware Basin operates in southeast New Mexico and across the state line into west Texas. It offers exploration and development opportunities from many geologic reservoirs and play types, including the oil-rich Wolfcamp, Bone Spring, Avalon and Delaware formations. Its Rockies development consists of its Williston Basin and Powder River Basin assets. The Eagle Ford operations are located in Texas' DeWitt and Karnes counties. The Anadarko Basin development is located in western Oklahoma. It has a joint venture with Dow to develop a portion of its Anadarko Basin acreage.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Financial Expectations: Wall Street anticipates Devon will report Q1 EPS of $1.09 on revenue of $3.93 billion, reflecting a year-over-year decline of about 12%, indicating financial pressures during the merger process.
- Long-term Strategy: The company emphasizes a disciplined approach focused on long-term oil price signals rather than reacting to short-term volatility, while exploring international cooperation opportunities with entities like Kuwait Oil Company, showcasing its intent for global expansion.
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- Producers' Advantage: Devon Energy and Diamondback Energy, as key operators in North America, are poised to benefit from rising oil prices, with both companies trading at a forward price-to-earnings ratio of approximately 10, indicating relative attractiveness compared to the broader market.
- Market Response: The escalating tensions between the U.S. and Iran in the Strait of Hormuz have prompted U.S. energy companies to ramp up production to buffer supply shocks, with expectations of increased investment flowing into the Americas in the future.
- Investment Advice: Given the likelihood of oil prices remaining above $100, investors should consider stocks of Devon Energy and Diamondback Energy, although market volatility is expected, these companies may represent solid long-term investment opportunities.
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- Surging Oil Prices: The ongoing conflict between the U.S. and Iran in the Strait of Hormuz has driven West Texas Intermediate crude futures to $105 per barrel and Brent prices close to $126, which is expected to boost energy stocks significantly.
- Increased Production in the Americas: Energy companies in the U.S. and South American nations like Venezuela, Colombia, and Brazil are ramping up crude oil production to counter the supply shock from the Middle East, with more investments anticipated to diversify away from this volatile region in the coming years.
- Investment Opportunities: Investors should consider stocks of energy companies focused in the Americas, such as Diamondback Energy and Devon Energy, which are seen as key sources for increased production in the current oil price environment, trading at a forward P/E ratio of around 10, below market averages.
- Market Volatility Risks: Although both stocks have risen approximately 40% year-to-date, the unpredictability of oil markets poses risks, as any resolution to the conflict could lead to a decline in oil prices, potentially reversing gains for these stocks.
See More
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- Job Market Expectations: According to FactSet consensus estimates, the U.S. is expected to add only 50,000 jobs in April, significantly lower than March's 178,000, indicating signs of economic slowdown that could impact investor confidence.
- Unemployment Rate Stability: The unemployment rate is anticipated to remain steady at 4.3%, suggesting that despite the decrease in job additions, the labor market remains relatively stable, potentially alleviating fears of an economic downturn.
- GDP Growth Situation: The U.S. GDP grew at a seasonally adjusted annualized rate of 2% in the first quarter, higher than the fourth quarter's 0.5% but below the 2.2% estimate, reflecting economic sluggishness that may influence future monetary policy decisions.
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