Oil markets are back in the spotlight after the fire at Saudi Aramco's Jazan refinery, fresh attacks on regional energy assets, and renewed questions over the Strait of Hormuz. Supply risks and Brent and WTI prices moving over 1% have pulled larger producers into focus again. This article walks through 3 stocks from the Energy Sector Stocks screener that appear most exposed to these headlines and explains why that might matter for your portfolio.

The three stocks below are just a starting sample from this theme, and the full screen surfaced 35 more companies with equally compelling narratives that are not covered here. If you want to identify which larger oil and gas producers best fit your own risk and return preferences, head straight into the Energy Sector Stocks (Oil & Gas Producers) screener.

Matador Resources (MTDR)

Matador Resources is a Dallas based independent oil and gas producer with a focus on the Wolfcamp and Bone Spring formations in the Delaware Basin, as well as positions in the Haynesville shale and Cotton Valley in Louisiana. It earns its revenue entirely in the United States, with about US$3.8b generated domestically, and has built a midstream arm that provides gathering, processing and transportation services for both its own volumes and third parties. The stock has a market cap of roughly US$6.1b, which puts it firmly in mid cap territory.

Investors watching the recent spike in Brent and WTI after the Jazan refinery fire may find Matador Resources worth a closer look, because it is a pure play on US oil and gas production with a growing midstream business that can earn fees even when prices are choppy. The company has been expanding its Delaware Basin footprint and midstream capacity, which supports cash generation. It also carries a relatively high debt load and a dividend that is not fully covered by free cash flow. Combined with management’s own focus on hedging and caution around global risk, this results in a producer that could potentially benefit from heightened energy market volatility, while still facing meaningful capital and policy risk that readers may wish to weigh carefully against any perceived upside.

Matador Resources looks like a classic production story, yet its mix of U.S. barrels, midstream fees and leverage could be masking the real risk reward skew. Get the full picture in the 4 key rewards and 2 important warning signs

Build your own oil and gas volatility shortlist

Matador Resources and the two other stocks in this article all surfaced from a single Simply Wall St screen, but the real edge is in creating your own set of filters. Use our customisable Screener to blend metrics like valuation, balance sheet strength, risks and dividends into a shortlist that fits your style, or tap into any of our curated Investing Ideas for ready made starting points.

SM Energy (SM)

SM Energy is a long established independent oil and gas producer that focuses on shale assets across the Midland Basin, South Texas, the Uinta Basin and the DJ Basin. The company generates all of its roughly US$5.1b in revenue from exploration and production activities in the United States and has a market cap of about US$6.9b, which puts it in mid cap territory.

SM Energy sits right in the crosshairs of today’s oil price story. It is a pure play U.S. producer whose cash flows are closely tied to Brent and WTI, now moving again after the Jazan refinery fire and renewed concern over the Strait of Hormuz. On one side, you have a company with operational efficiencies, strong recent earnings, debt being paid down and a valuation that screens as cheap on multiple measures. On the other side, you have concentrated shale exposure, elevated leverage and management turnover that could amplify the risks if price volatility turns the wrong way. Understanding how those moving parts fit together is what makes SM Energy worth a closer look for investors tracking the Energy Sector Stocks screener.

SM Energy’s mix of shale exposure, recent earnings strength and a valuation that screens as cheap hints at a story investors may be underestimating. See how the full risk reward picture stacks up in the 6 key rewards and 3 important warning signs (1 is major!)

Santos (ASX:STO)

Santos is a long running Adelaide based oil and gas producer that explores, develops and transports hydrocarbons across Australia, Papua New Guinea and Alaska, with a growing effort in decarbonization technologies such as carbon capture. Most of its revenue comes from gas and liquids projects in Papua New Guinea at about $2.5b and Queensland and New South Wales at about $1.1b, with additional contributions from the Cooper Basin and Western Australia. The stock has a market cap of roughly A$24.8b, which puts Santos firmly in large cap territory.

Investors watching the fallout from the Jazan refinery fire and Strait of Hormuz uncertainty may find Santos interesting because it sells LNG and liquids that are priced off global oil benchmarks, so supply risks elsewhere can support its contracted revenues. The company is ramping up the Barossa and Pikka projects, with Barossa already shipping condensate and running near planned rates, which ties directly into its LNG growth story and long term contracts. At the same time, earnings have been volatile, the dividend is not well covered by free cash flow and the P/E sits above local peers, so you are paying for execution on major projects and for Santos’ effort to manage carbon and regulatory pressures in sensitive regions.

Santos appears to be a growth story priced for flawless execution. However, its LNG projects, carbon ambitions and higher P/E leave a lot beneath the surface. Read the full full narrative for Santos

Seeking Alternatives Before The Crowd Moves

Fresh stock ideas do not stay under the radar for long. By the time momentum is flying, the best entry points can be gone. Consider taking time to research and act early, rather than trying to follow short-term moves.

• Identify cash rich businesses before momentum headlines catch up by running the list of solid balance sheet and fundamentals (48 results). This can help you find companies with strong balance sheets that the market may not be fully focusing on.
• Look for potential income-focused companies that aim to keep paying when markets turn by scanning the 8 dividend fortresses. This can highlight yields and payouts that may not be widely followed.
• Research companies that may benefit from developments in market infrastructure by zeroing in on the 56 AI infrastructure stocks. This may help you find businesses involved in foundational technologies that are not yet widely noticed.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.