OPEC-plus, the extended version of OPEC that came together several years ago to drive more policy power back into the global cartel-based oil regime, keeps delaying its expected production hike process because uncertainty still remains due to issues with vaccine distribution and the dangerous possibilities of new COVID-19 variants still emerging around the world.
That cautious stance promises to continue to support the oil market, which has been trending higher for most of the past year.
The most important thing to know about this situation is that almost no major investment has gone into developing new oil production capacity since the onset of the pandemic last year. In normal times, there is constant investment in developing new production capacity in any commodity for which there is expected demand growth over coming years.
Oil is just such a commodity, and this lack of investment suggests we can look forward to continued rising oil prices, which pays off for companies like Matador Resources Co (NYSE:MTDR), Allied Energy (OTCMKTS:AGYP), and Diamondback Energy Inc (NASDAQ:FANG).
Matador Resources Co (NYSE:MTDR) is an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays.
Its current operations are focused primarily on the oil and liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. Matador also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana.
Matador Resources Co (NYSE:MTDR) has discussed its plan to increase oil production in 2021 to generate additional cashflow. The company projects this year’s total oil production in the range of 17.2 to 17.8 million barrel, suggesting a 10% year-over-year improvement.
In addition, the company’s focus on capital efficiency should help the bottom line. This year, MTDR projects drilling and completion costs for operated horizontal wells turned to sales to plunge roughly 14% year over year. It is also looking to initiate dividend payments this year, which will help to drive investor interest in a virtuous circle in a rising oil price context.
While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action MTDR shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -9% on above average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -11%.
Matador Resources Co (NYSE:MTDR) generated sales of $257.6M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 16.1% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($91.4M against $290.9M, respectively).
Allied Energy (OTCMKTS:AGYP) is a smaller cap play in the space with an interesting angle on providing value that could multiply as the price of oil rises.
The company specializes in the business of reworking and re-completing existing oil and gas wells located in the thousands of mature oil and gas producing fields across the United States, with the objective of mobilizing its expertise and technology to drive higher production volumes, longer well life, and more efficient recovery of proven and available oil and gas reserves in acquired wells.
Allied Energy (OTCMKTS:AGYP) most recently announced that it has signed the final agreement contract with Energy Management Resources, LLC and has acquired an 80% stake in an initial two northern Texas oil wells identified as the “Palo Pinto #1” and “Palo Pinto #2” wells. Allied Energy’s land position will allow the company to develop up to ten additional wells in the surrounding Baylor County Texas area known locally as the “Green Lease.”
Allied CEO George Montieth elaborated on the acquisition: “With this Palo Pinto acquisition and with Curtis recently joining our team as Oil Operations Manager, real oil production for Allied is now only a few short weeks away. The Company’s goal before summer is to have multiple wells at two different lease locations producing daily, with more new wells coming online throughout 2021. Allied has two important things going for it now that it has never enjoyed before: 1) Strategic funding of acquisitions, in a shareholder-friendly way, is being done with the long-term success of the Company in mind and 2) Rising oil prices that make re-completing formerly producing wells with 21st century technology highly lucrative. We are in the right industry sector at the right time and now we have the working capital to take advantage of this surging oil market while putting our years of expertise to good use. Based on the leases we now hold and others we plan to acquire I believe that Allied will strongly position itself as an oil producer within this market sector.”
The company also noted in the release that the acquisition was non-toxic on the financing side, with a non-dilutive, all-cash purchase that “immediately adds significant value to Allied’s bottom line as a new asset on the books. Based on formal due diligence completed by Ardent Oil and Gas Consultants (http://ardentoil.com) the estimated ultimate recovery of the two Palo Pinto wells is approximately 113,000 barrels of oil or about $6.7 million dollars assuming a price of $60 per barrel for crude oil.”
AGYP shares have been in a sturdy upward trend over the past three months, rising as much as 500% in that time as the company ramps up its operations. Given the potential for an oil shortage this year, AGYP is well positioned for further gains upon signs of effective execution of its enormous opportunity.
Allied Energy (OTCMKTS:AGYP) is still in a pre-revenue phase, but it has made rapid progress this year in angling toward new production from acquired wells.
Diamondback Energy Inc (NASDAQ:FANG) has been one of the best performing names in the energy space over the past 10 months, ripping over 250% since November.
The company frames itself as Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas.
Diamondback Energy Inc (NASDAQ:FANG) recently announced (i) cash tender offer (the “Diamondback Tender Offer”) to purchase any and all of Diamondback’s outstanding 5.375% Senior Notes due 2025 (the “2025 Notes”) pursuant to the Offer to Purchase for Cash and Consent Solicitation Statement, dated March 4, 2021 (the “Diamondback Offer to Purchase”) and (ii) cash tender offers (the “QEP Tender Offers” and, together with the Diamondback Tender Offer, the “Tender Offers”) to purchase any and all of QEP Resources, Inc.’s (“QEP”) outstanding 5.375% Senior Notes due 2022 (the “2022 Notes”), 5.250% Senior Notes due 2023 (the “2023 Notes”) and 5.625% Senior Notes due 2026 (the “2026 Notes” and, together with the 2022 Notes and the 2023 Notes, the “QEP Notes” and, together with the 2025 Notes, the “Notes”) from holders of each series of the QEP Notes pursuant to the Offer to Purchase for Cash and Consent Solicitation Statement, dated March 4, 2021 (the “QEP Offer to Purchase” and, together with the Diamondback Offer to Purchase, the “Offers to Purchase”).
According to the company’s release, in connection with the Tender Offers, Diamondback also solicited consents from holders of each series of the Notes (collectively, the “Consent Solicitations”) to effect certain amendments (the “Proposed Amendments”) to the indentures governing each series of the Notes (collectively, the “Indentures”).
Even in light of this news, FANG has had a rough past week of trading action, with shares sinking something like -8% in that time. That said, chart support is nearby and we may be in the process of constructing a nice setup for some movement back the other way. Diamondback Energy Inc (NASDAQ:FANG) generated sales of $769M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 6.8% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($108M against $1.2B, respectively).
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