Here's Why Hold Strategy is Apt for Matador Stock Now

Matador Resources Company MTDR is a leading upstream player, having a strong foothold in prolific oil and natural gas shale and other unconventional plays. The company is likely to see earnings growth in 2024 and 2025.

What's Favoring the Stock?

The price of West Texas Intermediate crude, trading close to $80 per barrel, is highly favorable for exploration and production activities. Handsome crude price is likely to aid MTDR, carrying a Zacks Rank #3 (Hold), in increasing production volumes. For 2024, the company guided its total oil production in the band of 91,000 to 95,000 Bbl/d, suggesting a year-over-year hike of 23%.

On another positive note, Matador plans to turn to sales a net of 103.6 wells this year — including operated and non-operated wells. Its prime priorities are lowering debt, delivering free cashflows and maintaining or increasing dividends.

Overall, handsome commodity prices and expectations for higher production will likely aid Matador Resources' bottom line. 

Risks

However, being an upstream energy player, the company's overall operations are exposed to extreme volatility in oil and natural gas prices. This is reflected in the company's beta of 3.33.

Stocks to Consider

Better-ranked energy companies include Sunoco LP SUN, Ultrapar Participacoes SA UGP and Eni SpA E. All the stocks carry a Zacks Rank #2 (Buy).

Sunoco, the leading independent fuel distributor in the United States, has a stable business model and relatively lower exposure to commodity price volatility. This is because the partnership distributes fuel to branded distributors under long-term contracts. 

Ultrapar Participacoes has a stable business model banking on its huge network of energy and infrastructure businesses in Brazil. Being a leading distributor of liquefied petroleum gas to residential, commercial, and industrial consumers, Ultrapar may continue to generate stable cashflows.

Eni is leading the energy transition as well. The integrated energy player has been building a full set of decarbonized products and services for clients to achieve carbon neutrality by mid-century. Even though the energy business scenario is challenging, Eni's efficient exploration keeps it highly competitive.

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