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Top Oil Stocks To Watch In U.S. Shale As Oil Prices Rise

Oil stocks are in focus as oil prices surged to $130 per barrel following Russia's invasion of Ukraine.

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U.S. defense officials have said that Russia hit more resistance than expected as it makes its advance toward Kyiv. As Ukraine continues to hold out again advancing Russian forces, the U.S. and European allies have implemented sanctions across multiple sectors on Russia's economy including banking.

The Biden Administration announced a U.S. ban on imports of Russian oil on March 8, but European allies, who are highly dependent on Russian natural gas, are unlikely to join in. President Joe Biden is turning to Saudi Arabia, Iran and Venezuela to help replace heavy Russian crude that U.S. producers can't supply.

Goldman Sachs expects the U.S. shale response to be "modest initially, due to drilling times, still cautious producers and a tight service sector," according to a March 7 note.

Pushed by Wall Street, U.S. shale stocks have been focused on capital discipline in recent years and have not made plans to boost production this year.

For reference purposes here are the top stocks involved in U.S. shale as of March 8:

Exxon Mobil, Chevron

Exxon Mobil (XOM) is the world's largest publicly traded oil company by market cap ($380 billion), despite a sharp decline, with operations around the world from deepwater drilling off the Australian coast to conventional drilling in the Middle East.

The oil major also doubled its holdings in the Permian Basin, which accounts for one-third of U.S. production, with a $5.6 billion deal in 2017.

But the Covid-19 pandemic weighed on oil demand, sending oil prices lower and the company was booted off the Dow Jones Industrial Average in August 2020.

Demand has started to increase again as restrictions are lifted and the crisis in Ukraine is squeezing supply. Exxon announced that it would exit its Russian holding following the invasion and pull out of future projects.

In February, Exxon reported mixed fourth-quarter results. Oil-equivalent production rose 2% to 3.8 million barrels per day. Permian production volumes rose by nearly 100,000 bpd, on increased capital efficiency.

XOM stock is extended out of profit-taking range after breaking out of cup base with a 65.02 entry point ahead of earnings.

Meanwhile, global oil rival Chevron (CVX) is closing in on Exxon's dominance with a $334 billion market cap and is the only oil major on the DJIA.

Chevron and Exxon reportedly engaged in preliminary merger discussions in 2020, sources told the Wall Street Journal. The talks aren't currently ongoing but sources told the Journal the discussions could be revisited in the future.

Chevron also reported mixed Q4 results. The unrest in Kazakhstan hit Chevron's Tengiz field in early January, but the output delays were short-lived.


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ConocoPhillips

ConocoPhillips is one of the biggest Permian Basin producers and the largest U.S. independent oil company following the $9.7 billion acquisition of Concho Resources in January 2021. Conoco's market cap is now $129 billion.

The independent producer has expanded its holdings further, agreeing on Sept. 21 to pay $9.5 billion for Shell's (SHEL) approximately 225,000 net acres in Texas' Delaware Basin, which is part of the Permian. Conoco sees estimated 2022 production from the averages to be 200,000 bpd.

In February, Conoco reported Q4 earnings and revenue results that beat Wall Street estimates.

COP stock is now extended out of buy range after breaking out of a consolidation with a 78.08 entry point.


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EOG Resources

EOG Resources (EOG) is known as the "Apple of Oil" for its use of technology and big data to aid in drilling operations. The company has a $69 billion market cap.

The company has premium acreage in the Eagle Ford shale formation in south Texas and the Permian's Delaware Basin.

EOG fell short of analysts' expectations when it reported Q4 results in February.

Shares are currently in profit-taking range after EOG stock broke out of a cup base with a 98.30 entry.


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Pioneer Natural Resources

Pioneer Natural Resources is a pure-play Permian Basin company after selling its Eagle Ford assets in 2019. It has a market cap of $57 billion.

In May 2021, Pioneer closed its deal to buy DoublePoint Energy for $6.4 billion for nearly 100,000 acres in the core area of the Permian 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.

With both deals, Pioneer now has roughly 1 million net acres in the Permian and became the largest oil producer in the prolific basin, according to company officials. That will put it ahead of Occidental Petroleum (OXY) in the Permian.

Pioneer reported mixed Q4 results in February.

PXD stock is currently in profit-taking range after breaking out of a consolidation with a 196.74 buy point.


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Occidental Petroleum

Like Exxon Mobil and Chevron, Occidental Petroleum is a global company but is also the largest acreage holder in the Permian. It has a market cap of nearly $51 billion. Occidental expanded holdings in the prolific play after buying Anadarko for $27 billion in 2019.

To focus on the Permian, Occidental Petroleum sold off an oil field in Qatar to state-owned Qatar Petroleum in 2019. But it still has operations in Oman, Colombia and Libya. But some investors aren't happy with the deal and activist investor Carl Icahn and other shareholders were upset they were denied a vote on the deal.

Occidental Petroleum beat Q4 expectations in February. In March, Warren Buffett's Berkshire Hathaway (BRKB) disclosed that it bought a 9.8% stake in the company, about $5 billion shares.


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Continental Resources

Unlike many of its shale peers, Continental Resources (CLR) didn't rush to gain acreage in the Permian and instead kept its focus on North Dakota's Bakken play. The company is the largest producer in the Bakken. It has also been aggressive recently in Oklahoma's STACK and SCOOP shale plays. It has a market cap of $22 billion.

Continental Resources reported Q4 results that beat analyst expectations in February.  Continental sees a capital spending plan of $2.3 billion for 2022. The plan includes a 15% increase in spending in the Bakken and Anadarko Basins.

CLR stock is extended out of buy range after forming a cup base with a 55.58 entry.

Harold Hamm, Continental's founder and CEO, stepped down in 2020 and assumed the role of executive chairman. Former ConocoPhillips executive William Berry replaced Hamm.

Follow Gillian Rich on Twitter for energy news and more.

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