We recently compiled a list of the 12 Hot Oil Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Permian Resources Corporation (NYSE:PR) stands against the other hot oil stocks.
The United States of America is currently producing more oil and gas than any other country in the history of the world, with no signs of a slowdown. The country’s oil production has surged by almost 50% in the last ten years, reaching just over 13.45 million barrels per day in October 2024.
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These numbers could now pump even higher after President Donald Trump has held up the oil industry as a centerpiece of his broader economic mission, with claims that ‘we will drill, baby, drill’. The president has also signed executive orders declaring a national energy emergency and withdrawing from the landmark 2015 Paris climate agreement, the international pact to fight global warming. Trump has also swept aside the freeze on LNG export permits and signed orders to promote oil and gas development in Alaska, though the industry is unlikely to expand there anytime soon.
These aggressive steps have raised concerns of higher US output in a market that is already widely expected to be oversupplied this year. As per the International Energy Agency’s recent market outlook, growth in the global demand for oil is expected to slow down in the coming years as energy transitions advance, putting downward pressure on prices. The US Energy Information Administration stated earlier this month that it expects Brent crude oil prices to fall 8% to average $74 a barrel in 2025, then fall further to $66 a barrel in 2026.
So it still remains to be seen whether the US oil majors will answer the President’s call and shell out the big bucks required to heavily boost their production. Instead, companies appear to have shifted their focus from aggressive growth to keeping their shareholders happy through fat dividends and generous share buybacks. Despite the falling oil prices, more and more fossil fuel companies are returning a bigger chunk of their profits to shareholders, signaling a clear priority shift away from reinvestment in oilfield development. Several oil bigwigs have even resorted to borrowing to make sure they leave their shareholders satisfied, as revealed by Bloomberg that four of the world’s five oil ‘supermajors’ saw fit to borrow $15 billion to fund share buybacks between July and September 2024.
Therefore, according to a recent survey by the Federal Reserve Bank of Dallas, only 14% of oil and gas executives plan to significantly increase capital spending this year, while more of them have plans to cut spending instead of ramping it up. But this doesn’t mean that America’s oil and gas sector doesn’t stand to win with Donald Trump in the Oval Office, especially since it poured more than $75 million in donations to his campaign. The American Petroleum Institute, the most powerful oil lobby in the United States, has outlined a wishlist of 70 policy actions it is seeking from Republicans, including issuing a new 5-year offshore leasing program and repealing environmental standards on vehicle emissions.
Methodology:
To collect data for this article, we used a stock screener to pick oil stocks that have gained over 20% in the last 12 months, as of the close of January 18, 2024. From this group, we picked the 12 companies with the highest number of hedge fund investors, according to Insider Monkey’s database of Q3 2024. The stocks are arranged in ascending order of the number of hedge funds invested in them. Following are the Hottest Oil Stocks to Buy According to Hedge Funds.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a wellhead, showing off the company’s production of oil and natural gas.
Permian Resources Corporation (NYSE:PR)
Gain Over Past 12 Months: 23.36%
Number of Hedge Fund Holders: 56
Topping our list of Hot Oil Stocks To Buy According to Hedge Funds is Permian Resources Corporation (NYSE:PR), an independent oil and natural gas company focused on driving sustainable returns through the responsible acquisition, optimization, and development of high-return oil and natural gas properties.
Permian Resources Corporation (NYSE:PR) further bolstered its presence in the Permian Basin with the acquisition of Barilla Draw assets in Q3 2024, with the deal expected to boost the company’s output by about 24,000 barrels of oil equivalent per day. It would also add about 27,500 net acres to the PR’s footprint in the largest shale oil belt in the world. Additionally, it was recently announced that Permian Resources has agreed to divest its natural gas and oil gathering systems in the Delaware sub-basin of West Texas to Kinetik Holdings for a hefty sum of $180 million, allowing the fossil fuel company to return its focus to its exploration and production work and letting it proceed with development of the Barilla Draw assets.
One of Permian Resources Corporation (NYSE:PR)’s most significant developments has been the reduction in drilling and completion days per well, leading to substantial cost reductions and helping improve the company’s profitability. In Q3 of 2024, PR reduced its drilling and completion costs by 16% YoY, while also achieving a 16% YoY reduction in drilling cycle times and a 19% YoY increase in completion crew pump hours per day.
Permian Resources Corporation (NYSE:PR) is also one of the largest natural gas producers in the Permian Basin, producing approximately 600 million cubic feet per day of residue gas. This puts the company in a great position to cater to the rising LNG exports and also creates the potential for significant upside to free cash flow generation if natural gas prices improve going forward, as is widely expected.
Aristotle Capital Boston, LLC, stated the following about Permian Resources Corporation (NYSE:PR) in its Q3 investment letter:
“Permian Resources Corporation (NYSE:PR) is a Texas-based oil & gas exploration & production company with a large acreage position and deep inventory of high return potential drilling locations in the core of the Permian Basin. We expect management to continue to execute on its strategy of optimizing returns, diligently allocating capital to new opportunities, and returning excess capital to shareholders.”
Overall PR ranks 1st on our list of the best hot oil stocks to buy according to hedge funds. While we acknowledge the potential for PR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
