This Is the Best Energy Stock to Buy Right Now

Shah Gilani|April 24, 2023

With more than 1,700 companies on deck to report earnings this week, there’s going to be a lot of chatter about quarterly results. Rather than getting drawn into all the earnings narrative, I want to shift today’s focus to something much bigger, with a much longer time horizon. I’m talking about energy, specifically, U.S. energy production in the Permian Basin.

In case you’re not familiar with the Permian Basin. It’s an oil-and-gas-producing area located in West Texas and the adjoining area of southeastern New Mexico. It covers an area approximately 250 miles wide and 300 miles long and is composed of more than 7,000 fields in West Texas.

The greater Permian Basin accounts for nearly 40 percent of all oil production in the United States and nearly 15 percent of its natural gas production, according to the Federal Reserve Bank of Dallas.

The Delaware Basin, alone, within the Permian Basin, has the potential to produce 46.3 billion barrels of oil and the potential to produce 281 trillion cubic feet of natural gas.

That’s huge, and over the next several years, if not decades, that’s going to be very profitable for energy producers with exposure to the region.

Oner of my favorite ways to play the trend is by way of Diamondback Energy, Inc. (FANG) an independent oil and natural gas company, which focuses on the acquisition, development, exploration, and exploitation of unconventional and onshore oil and natural gas reserves in the Permian Basin.

The company boasts excellent financials, with profit margins and operating margins of 48.2% and 65.99%, respectively. Over the trailing 12-months, the company generated more than $9 billion in revenue and net income of $4.34 billion.

Those are really solid numbers, and I think it makes Diamondback look very attractive as an acquisition candidate.

Speaking of acquisitions in the energy space, just two weeks ago, Exxon Mobil Corp (XOM) announced it was in preliminary talks with Pioneer Natural Resources Co (PXD), which is the third largest oil producer in the Permian Basin.

If PXD looks attractive, with a $52.66 billion market cap, then I think FANG (with a $26.65 billion cap) and exposure to the Permian Basin looks very attractive as well.

Even if FANG doesn’t get acquired, I want to own shares of FANG for the long run because of its exposure to the Permian Basin, stellar financials, and its 7.97% dividend yield.

Rather than buying options for a short-term “flip the chart” opportunity, I like buying shares of Diamondback Energy, Inc. (FANG) for the long run, right now.

And there are more opportunities to be had here. Major oil and gas companies are pushing to acquire assets in the Permian on an unprecedented scale, with trillions of dollars in play. Knowing the right companies to target is essential for investors looking to take potential advantage – and Money Morning LIVE‘s executive producer, Garrett Baldwin, has a full battle plan laid out.

You can check it out here.