Scotiabank Names Diamondback, Expand Energy, Chord, and Permian Resources Top E&P Picks

15 oct., 19:59 UTCHaussierImpact moyen

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Scotiabank initiated coverage on four oil and gas producers on Thursday with Sector Outperform ratings, designating Diamondback Energy, Inc. (NASDAQ:FANG), Expand Energy Corporation (NASDAQ:EXE), Chord Energy Corporation (NASDAQ:CHRD), and Permian Resources Corporation (NYSE:PR) as top selection choices in the exploration and production sector. Analyst Mark Lear pointed to strong cash flow growth across the companies as a primary driver for the positive outlook.

Each of the highlighted energy firms brings distinct operational advantages to the market. Diamondback Energy stands out for its well productivity and low operating costs, positioning it to generate cash for dividends, share buybacks, and debt reduction. Expand Energy benefits from proximity to Gulf Coast LNG demand through its Haynesville assets, holding direct pipeline access to Gillis. Meanwhile, Chord Energy trades at 1.9 times estimated 2027 EBITDAX with a 24.8% free cash flow yield thanks to high capital efficiency in the Bakken, and Permian Resources offers low-cost inventory expansion trading at 3.3 times estimated 2027 EBITDAX.

Investors will be watching how these producers balance capital allocation between production growth and returning capital to shareholders amid competing gas flows in the Gulf Coast region. Market performance will also depend on whether valuation multiples catch up to projected 2027 earnings and cash flow metrics.

Points clés

Scotiabank assigned Sector Outperform ratings and top pick status to Diamondback Energy, Expand Energy, Chord Energy, and Permian Resources.
Diamondback Energy is highlighted for its low-cost operations, strong well productivity, and cash flow generation supporting debt reduction and shareholder returns.
Expand Energy maintains a dominant Haynesville position with 2.5 Bcf per day of direct access to Gillis, giving it direct exposure to Gulf Coast LNG demand.
Chord Energy and Permian Resources trade at modest 2027 EBITDAX valuations of 1.9x and 3.3x while offering attractive free cash flow yields.

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Questions et réponses

Why did Scotiabank name Diamondback Energy a top pick?

Scotiabank highlighted Diamondback Energy's low-cost structure, superior well productivity, and ability to expand production while retaining cash for debt reduction, dividends, and share buybacks.

What are Scotiabank's new ratings for Expand Energy and Chord Energy?

Scotiabank initiated coverage on both Expand Energy and Chord Energy with Sector Outperform ratings, naming them among its top picks in the exploration and production sector based on cash flow growth and favorable valuations.

What is Permian Resources' valuation according to Scotiabank's estimates?

Permian Resources trades at 3.3 times estimated 2027 EBITDAX with an 18% free cash flow-to-enterprise value yield, which analyst Mark Lear noted does not fully reflect its low-cost inventory additions.