As of the time of writing, Crude Oil WTI Futures with expirations in March 2022 traded around $83.09 per barrel while Brent Oil Futures with expirations in April 2022 traded near $85.37 per barrel, retreating slightly from historical record levels reached last Wednesday.
The last time similar price levels were observed was October 2014. Since then, the price per barrel has not come close to $87 for crude oil or above $88 for Brent.
Analysts project that if the Covid-19 virus persists, oil prices should continue to rise. OPEC+ doesn't want to increase the supply of oil, but the economic recovery still requires larger amounts of energy. This situation can only produce upward pressure on the price of oil.
To benefit from the anticipated increase in oil prices, investors should consider looking for opportunities in the oil industry, where Pioneer Natural Resources Co. (PXD, Financial) has certain characteristics that could help the stock price trade higher in the future.
Based in Irving, Texas, Pioneer Natural Resources is an independent exploration, development and production company for oil and gas minerals in the Permian Basin of West Texas. The company currently has proven reserves of more than 30 million barrels of oil, 17 million barrels of natural gas liquids and nearly 90 billion cubic feet of gas. In addition, the company has interests in 11 gas processing plants.
As crude oil and Brent prices rose more than 50% each over the past year, Pioneer Natural Resources' share price climbed 67%. As a result, a growing number of analysts are positive about the company, giving it a medium buy recommendation rating. The average target price of $233.09 reflects a 14% increase from Monday's close.
The profitability of the company's operations has outperformed most of its competitors, attracting analyst and market interest.
In the first nine months of 2021, strong execution across the portfolio (year-on-year oil equivalent supplies increased by 61.3% to 594,000 barrels per day), coupled with higher commodity prices, allowed Pioneer Natural Resources to earn record total revenue of $10.33 billion, which reflected 114% growth from the same period in 2020.
The operating income margin also improved to 30.87% versus a much lower industry median of 4.43%.
With the company expected to deliver as much as 615,000 barrels of oil equivalent per day through the end of 2021, the strong commodity price environment should allow shareholders to remain bullish on further increases in supply over the coming quarters.
This, along with the disposal of certain assets, should provide funds to strengthen its balance sheet, which will ultimately allow the operator to continue growing its quarterly dividend. Should this happen, the stock price will gain an additional catalyst.
On Jan. 14, the company paid a quarterly dividend of 62 cents per common share, up 10.7% from the previous payout, determining a forward dividend yield of 1.11% as of Jan. 24.
The stock is not cheap as it trades above the 50-Day Moving Average value of $187.77 and the 200-Day Moving Average value of $167.53.
However, given the oil price outlook and the company's upside potential, this stock is definitely worth considering.
