Oil stocks continue to dominate investors’ watchlists. Among top stocks in this leading sector, Earthstone Energy (ESTE) in IBD Sector Leaders stands out for its high-quality fundamentals.
The New Texas Oil Boom Lifts Oil Stocks In Permian Basin
Earthstone Energy is currently an IBD 50 index component. The Woodlands, Texas-based firm is an exploration and production firm that’s benefited from the recent Texas oil boom, powered by shale deposits in the Permian Basin.
When Russia attacked Ukraine in February, oil stocks boomed. As the war has continued to drag on, the U.S. government reopened idle shale fields, and these companies began reinvesting their profits in drilling the greater Permian Basin. This area now accounts for nearly 40% of crude production and 15% of natural gas production, according to the Federal Reserve Bank of Dallas.
Oil output in the west Texas and southeastern New Mexico regions is forecast to rise by about 50,000 barrels per day (bpd) to a record 5.45 million bpd in November, the U.S. Energy Information Administration said.
For comparison, the shale oil-rich Bakken drilling are a in North Dakota and Montana is forecast to produce 1.19 million bpd in November.
This increase is affecting oil stock companies like Earthstone’s bottom line. Earthstone Energy is expected to show a massive 283% EPS increase in 2022 from the prior year. Analysts forecast earnings of $4.79, up from $1.25 in 2o21.
Earthstone Trades Above Resistance After Q3 Earnings
After reporting earnings on Nov. 2, the oil stock has traveled mostly sideways but traded above a key resistance level earlier in the week.
Third-quarter revenue beat expectations, but the company came up short on earnings. Analysts expected EPS of $1.42 a share on revenue of $460.4 million. Earthstone reported earnings of $1.30 a share on sales of $531.5 million.
Earnings still grew a powerful 271% year over year, while sales rose 382%, according to IBD MarketSmith.
The oil stock is trading near a short term resistance level around 17.25. A move above this area would be positive for ESTE stock. Investors may also interpret it as a murky double-bottom base with a buy point of 17.25. Earthstone stock is up about 45% year to date.
Its relative strength line has been climbing nicely on the stock’s weekly chart. Perfect EPS and Composite Ratings of 99 also bode well for the stock.
Earthstone initially broke out on Monday, but shares pulled back the past week. The stock is now near its 21-day exponential moving average and above the 50-day moving average.