Oil price surge lifts Diamondback and Devon Energy as top energy investments
Oil prices have climbed sharply this year, rising from around $57 per barrel in January to nearly $88. The surge has put energy stocks in the spotlight, with companies like Diamondback Energy and Devon Energy standing out as attractive investments. Both firms trade at low price-to-free cash flow multiples, drawing interest from investors seeking energy exposure.
Diamondback Energy has positioned itself as a strong player in the Permian Basin. The company focuses on capital discipline and operational improvements to keep its break-even price low. Its hedging strategy protects against price drops while allowing gains if oil rises above $50 per barrel. These measures also support a base dividend of $4.20 per share, currently yielding 2.2%.
Meanwhile, Devon Energy is set to expand its footprint in the Delaware Basin. A planned merger with Coterra Energy will nearly double its acreage there and reduce its break-even price to under $40 per barrel. The combined company will hold the largest share of Delaware Basin inventory, boosting efficiency and cost savings. The recent spike in oil prices follows geopolitical tensions, including the conflict in Iran. However, predicting how this will affect long-term production and pricing remains difficult. Analysts suggest that protecting against prolonged high prices is wise, especially when stocks appear undervalued at $50 per barrel.
Diamondback and Devon Energy offer investors strong cash flow potential in a volatile oil market. Diamondback's disciplined approach and hedging provide stability, while Devon's merger with Coterra strengthens its position in the Delaware Basin. Both companies remain well-placed to benefit from current price levels and operational efficiencies.
