Top Shale Oil Stocks To Report As Another Blockbuster Permian Deal Looms

Pioneer Natural Resources (PXD) missed Q2 views while Diamondback Energy (FANG) and Continental Resources (CLR) beat late Monday, as the shale oil stocks also detailed bigger shareholder returns. Diamondback also expects to keep output flat in 2022.


The reports come as Royal Dutch Shell (RDSA) looks to sell Permian Basin assets worth up to $10 billion with Chevron (CVX), ConocoPhillips (COP) and Devon Energy (DVN) among the potential buyers, according to Bloomberg.

A deal for Shell’s Permian assets could be the biggest since ConocoPhillips bought Concho Resources for $9.7 billion in January to become one of the biggest Permian producers and the largest U.S. independent oil company.

Diamondback Energy

Estimates: EPS to soar 1,400% to $2.25 as revenue jumps 218% to $1.35 billion.

Results: EPS of $2.40 on revenue of $1.68 billion. The company also raised its quarterly dividend 12.5% to 45 cents from 40 cents. Also, beginning in 2022, Diamondback plans to return 50% of our free cash flow to our stockholders.

Outlook: Management raised its full-year production guidance to 363,000-370,000 barrels of oil equivalent per day from 350,000-360,000 bpd, while trimming its capital spending guidance to $1.525 billion-$1.625 billion from $1.6 billion-$1.75 billion due to cost control and volume outperformance.

Diamondback plans to keep production flat next year at the level it will reach by Q4 of this year, though that will require 10%-15% more capital vs. revised 2021 views.

“From a macro perspective, the world oil market is still artificially undersupplied and there is not a call on shale production growth today,” said CEO  Travis Stice. “Therefore, Diamondback will maintain capital discipline by holding oil production flat for the foreseeable future.”

Stock: Shares fell 0.3% late after closing down 0.5% at 76.75 on the stock market today as oil prices dropped.

Diamond added to its Permian holdings earlier this year with the acquisitions of QEP Resources and acreage from Guidon Operating.

Pioneer Natural Resources

Estimates: Analysts see EPS of $2.62 vs. a loss of 32 cents per share a year ago, as revenue jumps 310% to $3.52 billion.

Results: EPS of $2.55 on revenue of $3.42 billion. The company also declared an inaugural variable dividend of $1.51 per share to be paid during Q3. That’s on top of its regular dividend.

Outlook: Management maintained its 2021 capital budget guidance at $3.1 billion-$3.4 billion and its production view at  605,000-631,000 barrels of oil equivalent per day.

Stock: Shares rose 0.7% late after finishing 2.1% lower at 142.35, remaining below the 50-day line, according to MarketSmith chart analysis.

Pioneer has emerged as a major player in the Permian. In May, the company closed its deal to buy DoublePoint Energy for $6.4 billion for nearly 100,000 acres in the core area of the basin. That followed a deal to buy Parsley Energy in an all-stock transaction valued at about $4.5 billion that closed early this year.

Continental Resources

Estimates: Continental is seen swinging to a profit of 57 cents per share from a 71 cent per-share loss in the year-ago quarter. Revenue is seen soaring 537% to $1.12 billion.

Results: EPS of 91 cents on revenue of $1.24 billion. The company resumed a $1 billion stock buyback program after announcing Friday that it increased its quarterly dividend to 15 cents from 11 cents.

Stock: Shares rallied 3.5% late after closing down 1.4% ay 33.68, continuing to hit resistance at the 50-day line.

Unlike other shale oil stocks, Continental focuses on the Bakken shale formation in North Dakota, not the Permian Basin.

Occidental Petroleum (OXY) and ConocoPhillips report early Tuesday. EOG Resources (EOG) reports late Wednesday.

While profits at shale oil stocks have returned since last year, when crude prices collapsed during the early days of the pandemic, the focus has shifted to whether producers will continue to maintain capital discipline and not ramp up drilling aggressively.

Follow Gillian Rich on Twitter for energy news and more.


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