Small Oil Stocks That Even Big Oil Can’t Resist Buying

Big money just can’t resist the temptation of small oil stocks. 

Not that we blame them, mind you. Today, energy is arguably one of the most oversold sectors in the market, and you know just as well I do how smart investors relish finding a basement bargain. 

After all, we saw a clear overreaction earlier this month when oil sold off at the conclusion of OPEC’s latest meeting, when the group announced that it would start reeling-in its output cuts in 2025 — if the market allows. 

Truth is, this buying frenzy has been taking place for a long time.

Warren Buffett has been bolstering Berkshire’s position in Occidental Petroleum for years, and his OXY shares have built up a nice tidy profit so far. 

But that’s a drop in the bucket compared to Big Oil’s hunger for smaller oil stocks. To be fair, when you’re ExxonMobil and is sitting on a market cap of $511 billion, everything is small to you; scooping up Pioneer Natural Resources for $60 billion was an easy choice.

It’s the same for the rest of Big Oil, too. 

Chevron didn’t bat an eye dishing out $53 billion for Hess. 

The deals just keep on coming, too. Last month, ConocoPhillips announced it was buying Marathon oil for a cool $22.5 billion, which includes $5.4 billion in debt. 

Look, there’s a reason why small oil stocks are being swallowed up by the major players. Simply put, they see something going on right now that most don’t — and it opens up a huge window of opportunity for individual investors like us.

The disconnect between markets and reality has been a recurring theme for us here at Energy and Capital, and forecast revisions have become somewhat of a regular occurrence. In fact, the EIA’s last Short-Term Energy Outlook recently showed another increase in its 2024 oil demand projections; the EIA now sees global demand rising by 1.1 million barrels per day this year, followed by another 1.5 million barrels per day in 2025. I’ll note that OPEC’s outlook for demand growth has remained unchanged at 2.25 million barrels per day. 

So, it turns out that the slowdown for oil hasn’t materialized yet… nor will it, if we keep seeing more of these revisions. 

That brings us to Big Oil’s buying spree…

If there’s one thing you need to know about those giant oil companies like ExxonMobil, Chevron, and the rest of the supermajors, it’s that they don’t grow through the drill-bit. By that, I mean that they aren’t the ones doing most of the drilling. Instead, they utilize their war chests to grow through acquisitions, not by being the first to a punch. 

This is why ExxonMobil can sit back comfortably, watch a small driller like Pioneer Natural Resources grow into a top player in the Permian Basin, then drop a cool $60 billion for all that hard work. 

It’s as simple as that. 

But there’s an interesting situation developing in the United States’ oil patch. 

Production isn’t growing as fast as it used to.

After watching U.S. domestic crude production climb more than a million barrels per day last year, we are officially picking up right where we left off when COVID hit. The latest data from the EIA (if we can trust it) shows that U.S. field production is at 13.2 million barrels per day. 

Personally, I don’t think there’s much room to run higher — certainly not at the same pace as it did in 2023. 

If you need one clear signal that stagnant growth is ahead, look no further than the latest Baker Hughes rig count, which showed another weekly decline in the numbers of oil rigs operating in the United States. 

These rig counts give us a glimpse into drilling activity, however more concerning isn’t the slight week-over-week decline, rather the long-term decline. 

Right now, there are 506 oil rigs out there in the field. A year ago, there were 86 fewer rigs running…

If you go back to late 2019 — the last time our production was above 13 million barrels per day — there were nearly 700 rigs drilling for oil!

The reason why our oil output is so strong isn’t because companies are drilling wells at the speed of light, it’s because they’re drilling efficiently. I’m talking about longer laterals fracking wells simultaneously, multi-pad drilling and pumping more proppants into the well. 

There’s only so much one can do, right? You’d be surprised.

Game-changing drilling technology doesn’t come around too often. So, when you DO come across those hidden gems in the U.S. oil patch that are successfully showing they can cut both time and money to drill and complete new wells… Well, you shouldn’t ignore the opportunity. 

And that, dear reader, is precisely what my readers and I have uncovered in the heart of Texas’ Permian Basin. 

In fact, this small oil stock may turn out to be the next one swallowed up by Big Oil… perhaps it’s time you checked out the details for yourself.

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

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