Top 4 Drillers Ready to Go When Shale Revolution Restarts

 | Sep 23, 2016 | 3:15 PM EDT
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Patience is not necessarily a virtue when it comes to oil markets.

Falling crude prices over the past two years -- which are down almost 60% since mid-2014 highs -- have made the geographical concentration of U.S. drilling activity incredibly narrow. And some familiar names have turned off their rigs waiting for oil to hit $60 a barrel or higher before again getting their hands dirty.

Others are still flooding the market, hoping to be the first able to tap paydirt when it once again becomes lucrative in the U.S. These are the companies to bet on if you're an oil bull.

"There's a ton of producers out there that continue to press hard on the gas pedal despite the fact that a lot of their production is uneconomic," Real Money's Dan Dicker said in a phone interview.

After all, half of all onshore rigs in the continental U.S. are based in just 20 counties, RBN Energy analyst Sheetal Nasta said in a recent investment note.

"In effect, this also means a lot of the new production growth will come primarily from these same 20 counties, with the potential for all sorts of implications for infrastructure and regional price relationships," Nasta added.

So, who stands to gain? The producer best poised are those still operating, which can best respond to price adjustments. If lightning strikes and oil hits, say, $60, they're already way down the production curve when it comes to drilled-but-uncompleted wells, or what the industry calls "DUCs."

Take a look at Pioneer Resources (PXD) : a major player in Texas's Permian basin, one of the few basins still hot in the U.S., as opposed to the Texas's Eagle Ford region, whose production has recently fallen off sharply.

According to Dicker, Pioneer is among the players still "flooding the market" waiting for prices to heat up. Pioneer shares are already up about 39% so far this year, largely in tandem with rising crude prices.

"They've been one of the few, one of the most open about continuing to pump at breakneck speeds in the hope that they'll be first to the trough when oil prices recover," he said.

Another hot spot is Oklahoma's Bakken basin, where Oklahoma City-based Continental Resources (CLR) has been particularly active, Dicker added. Shares of Continental are now up about 100% so far in 2016.

But in terms of pumping in the hottest basins, it's worth mentioning that Continental has recently pulled out of the third major U.S. hot spot, North Dakota, in last month's sale of 68,000 net acres in Williams County. The $222 million sale also included about 12,000 acres in Roosevelt County, Montana.

"Midcontinent shale drillers are on the move once again," analysts with Coleman Research said in a recent report, noting North Dakota's Dunn, McKenzie, Mountrail and Williams counties are still favorable drilling spots at $45 a barrel prices. (Oil was trading at about $44.37 in midday Friday.)

For a driller best poised to gain on climbing crude, Coleman pointed to Houston-based oil giant EOG Resources (EOG) , whose shares recently hit a 52 week high, and are up about 27% so far on the year. Coleman's thesis highlights EOG's recent $2.5 billion stock-for-stock acquisition for Yates Petroleum, which has a significant presence in the Permian basin of Texas.

"Investors generally applauded the deal, which gives EOG access to high-quality, low-cost reserves that can easily hit the company's takeaway lines in lockstep with WTI improvements," the analysts added. "In contrast, EOG's rivals are shedding assets and undertaking tough debt workouts, which are creating opportunities and headaches for fixed income investors."

For a fourth choice, the bulls in U.S. oil may want to consider Houston-based Apache (APA) , which just discovered what could be about 3 billion barrels in the Permian basin, as Real Money reported. Apache said it found 307,000 drillable acres in the Alpine High region of the Permian, unveiled earlier this month on the company's quarterly earnings call. The company's CEO calls the find of what a Jefferies analysts value at about $2.7 billion "just amazing," and which could be tapped at a "very, very low entry cost."

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