Oil Near $100 Could Deliver $63 Billion Windfall for U.S. Shale Stocks EOG, DVN, FANG, and PR

Oil prices jumped after the Iran war began in late February. However, the move may bring significant gains for several U.S. oil firms that operate shale fields at home.

Claim 70% Off TipRanks Premium

• Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions

• Stay ahead of the market with the latest news and analysis and maximize your portfolio’s potential

Brent crude (CM:BZ) rose above $100 per barrel last week, while West Texas oil closed near $99. Analysts say that if oil (CM:CL) stays near $100 for the year, U.S. producers could gain about $63.4 billion in extra cash flow.

The key reason is simple. Many U.S. shale firms run most of their wells in North America. As a result, they gain from high oil prices but face less risk from Middle East supply cuts.

Meanwhile, the war led Iran to shut the Strait of Hormuz, a sea route that moves about 20 million barrels of oil per day. Research from Goldman Sachs GS -0.67% ▼ shows about 18 million barrels of that flow are now blocked.

President Donald Trump also noted the impact on the U.S. energy sector. In a social media post, he wrote, “The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money.”

As a result, a few U.S. shale firms could see strong gains if high prices hold.

Four U.S. Producers That Could Benefit

2. EOG Resources

First, EOG Resources EOG +0.42% ▲ stands out as one of the most cost-smart shale firms in the U.S. The company runs large oil fields in Texas and North Dakota. Because most of its output comes from U.S. land wells, higher oil prices can lift profit and cash flow with less global risk.

2. **Devon Energy**

Next is Devon Energy DVN +0.65% ▲ , which also holds a strong spot in the shale space. The firm runs wells in the Delaware Basin and other oil-rich areas. Importantly, Devon uses a plan that links its dividend to free cash flow. When oil prices rise, that plan can lead to larger payouts for investors.

3. Diamondback Energy

In addition, Diamondback Energy FANG +3.03% ▲ is a pure Permian Basin play. The firm pumps about 500,000 barrels of oil per day from the region. That large base can help the firm turn higher crude prices into fast cash gains.

4. Permian Resources

Permian Resources PR +1.47% ▲ also runs wells in the Permian Basin. The region is now the largest oil field in the U.S. If oil stays near $100, firms with large Permian output could see strong revenue growth.

Supply Shock Raises Oil Market Risk

At the same time, the Iran conflict is causing strain across the global oil trade. The Strait of Hormuz carries about one-fifth of the world’s oil and gas flow. With the route shut, a large share of the supply is now stuck.

Some global oil firms face risk from the shutdown. Companies with wells or gas plants in the Gulf region may see output fall while repairs take time.

Industry chair Martin Houston noted the scale of the risk. He said, “There are no winners in this situation.” He added that many oil firms would prefer “the status quo from two weeks ago” instead of a crisis that lifts prices for a short time.

Still, U.S. shale firms with local output may gain from the price rise if the war lasts.

However, some analysts think the spike may not last. Bank of America BAC -0.87% ▼ said the oil market still expects prices to fall back near $75 per barrel within months once supply flows return.

For now, though, the war has pushed oil above $100 and placed U.S. shale producers in a strong spot. If the price stays high through the year, firms like EOG Resources, Devon Energy, Diamondback Energy, and Permian Resources could see a major cash windfall.

We used TipRanks’ Comparison Tool to align all four companies appearing in the piece to gain an in-depth view of their operations and the broader oil and energy industry.

Disclaimer & DisclosureReport an Issue