Are Select US E&P Stocks Worth a Look Amid Energy Swings?

The Zacks Oil and Gas - Exploration and Production - United States remains heavily tied to swings in oil and gas prices, which continue to cloud near-term visibility. Earnings are sensitive to crude volatility driven by geopolitics, uneven global growth and shifting supply decisions. When prices soften, producers often pull back on spending, which slows down growth and weighs on sentiment. Infrastructure bottlenecks and cost pressure add to the strain, limiting price realizations in some regions. These challenges are reflected in the industry’s weak Zacks Industry Rank and sharp underperformance versus the broader market over the past year. That said, the picture is not uniformly negative. Natural gas demand is showing more durable support, backed by LNG exports and rising power needs, which could stabilize cash flows for gas-weighted players over time. Valuations also appear more reasonable compared with the S&P 500. Despite the cautious backdrop, investors looking for selective exposure may consider names such as Coterra Energy CTRA, Antero Resources AR, APA Corporation APA and W&T Offshore WTI.

About the Industry

The Zacks Oil and Gas - US E&P industry consists of companies primarily based in the domestic market and focused on the exploration and production (E&P) of oil and natural gas. These firms find hydrocarbon reservoirs, drill oil and gas wells, and produce and sell these materials to be refined later into products such as gasoline, fuel oil, distillate, etc. The economics of oil and gas supply and demand are the fundamental drivers of this industry. In particular, a producer’s cash flow is primarily determined by the realized commodity prices. In fact, all E&P companies' results are vulnerable to historically volatile prices in the energy markets. A change in realizations affects their returns, causing them to alter their production growth rates. The E&P operators are also exposed to exploration risks where drilling results are comparatively uncertain.

3 Key Trends to Watch in the Oil and Gas - US E&P Industry

Commodity Price Volatility and Uncertain Oil Balances: A major downside risk for the industry remains ongoing commodity price volatility, particularly in crude oil. Global oil markets continue to be influenced by factors that are difficult to predict or control, including geopolitical developments, shifting OPEC+ behavior, sanctions, and uneven global economic growth. Even small changes in these variables can trigger sharp swings in prices, creating planning challenges for producers. When oil prices weaken, capital spending decisions become more cautious, returns on new projects compress, and investor sentiment can deteriorate quickly. This uncertainty often leads companies to prioritize short-term cash protection over long-term growth, which can cap industry expansion. For investors, volatile oil pricing reduces earnings visibility and increases the risk that free cash flow generation may fall short of expectations during down cycles, making the sector less attractive in risk-off market environments.

Structural Upside from Natural Gas Demand Growth: A key positive macro driver for the domestic upstream operators is the visible and sustained improvement in natural gas demand fundamentals. The industry is entering a phase where demand growth is no longer speculative but tied to real, large-scale infrastructure. LNG export capacity in the United States continues to expand, with new facilities ramping up volumes and additional projects scheduled over the next few years. At the same time, gas-fired power generation is seeing a renewed push, driven by rising electricity needs from data centers, electrification, and industrial load growth. These demand sources are long-cycle in nature and require reliable baseload energy, positioning natural gas as a preferred fuel. On the supply side, capital discipline and slower drilling activity limit the risk of near-term oversupply. This combination of firm demand visibility and moderated supply growth supports stronger pricing, improves cash flow stability, and enhances the long-term investment appeal of gas-weighted U.S. E&P assets.

Infrastructure Constraints and Cost Pressure: Another macro headwind is the persistent challenge around infrastructure availability and cost inflation. In several producing regions, pipeline capacity, processing facilities and power infrastructure remain tight, limiting the ability to efficiently move hydrocarbons to end markets. When takeaway capacity is constrained, regional price discounts can widen, directly hurting realized prices. At the same time, while operational efficiency has improved, service costs remain sensitive to activity levels. As demand recovers or shifts geographically, competition for rigs, completion crews, and midstream access can drive costs higher. These pressures reduce margin expansion and can offset gains from better commodity prices. Infrastructure buildouts are also capital-intensive and slow to develop, meaning mismatches between supply growth and market access can persist longer than expected, adding another layer of risk for industry-wide returns.

Zacks Industry Rank Indicates Bearish Outlook

The Zacks Oil and Gas - US E&P industry is a 32-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #178, which places it in the bottom 27% of 244 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates challenging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming pessimistic about this group’s earnings growth potential. While the industry’s earnings estimates for 2025 are likely to have gone down 29% in the past year, the same for 2026 have fallen 43.7% over the same timeframe.

Despite the dull near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.

Industry Underperforms S&P 500 & Sector

The Zacks Oil and Gas - US E&P industry has fared worse than the Zacks S&P 500 composite and the broader Zacks Oil – Energy sector over the past year.

The industry has moved down 31.1% over this period against the broader sector’s increase of 5.3%. Meanwhile, the S&P 500 has gained some 19%.

One-Year Price Performance

Industry's Current Valuation

Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of noncash expenses.

On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at 9.90X, significantly lower than the S&P 500’s 18.80X. It is, however, well above the sector’s trailing 12-month EV/EBITDA of 5.52X.

Over the past five years, the industry has traded as high as 16.04X and as low as 3.56X, with a median of 6.62X.

Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio (Past Five Years)

 

4 Stocks to Consider

W&T Offshore: The company is an independent oil and natural gas producer with a long-standing presence in the Gulf of America. Public since 2005, W&T Offshore holds working interests in 50 offshore fields across federal and state waters and controls more than 600,000 gross acres. Its asset base features low-decline reservoirs, strong well productivity and substantial remaining reserves, which have helped the company generate positive cash flow for over 28 consecutive quarters.

Founded in 1983, W&T Offshore has grown through targeted acquisitions and disciplined development. This Zacks Rank #2 (Buy) company has completed roughly $2.7 billion in Gulf of America acquisitions since its IPO and maintains a drilling success rate near 90%, supported by deep technical expertise. With reserves of 248 million barrels of oil-equivalent and daily production of 35.6 thousand barrels of oil-equivalent in the third quarter of 2025, WTI continues to focus on cost reductions, reserve life extension and a steady pipeline of organic and acquired growth opportunities.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

W&T Offshore beat the Zacks Consensus Estimate for earnings in three of the last four quarters and met in the other, with the average being 27.1%. WTI has a market capitalization of $233.6 million.

Price and Consensus: WTI

Coterra Energy: It is an independent oil and gas producer based in Houston, with core operations in the Permian Basin, the Marcellus Shale and the Anadarko Basin. Formed in 2021 through the merger of Cimarex Energy and Cabot Oil & Gas, the company brings together long-standing assets across some of the most productive U.S. regions. CTRA’s portfolio blends shale and conventional resources, giving it flexibility across cycles.

Coterra Energy’s production is weighted toward natural gas, which makes up roughly 60% of output, alongside oil and NGLs. The Marcellus assets rank among the lowest-cost gas plays in the country, while the Permian position adds oil growth. A disciplined capital approach supports steady cash flow and balance sheet strength.

Coterra’s expected earnings per share growth rate for three to five years is currently 27.8%, which compares favorably with the industry's growth rate of 17.2%. Valued at around $20 billion, Coterra Energy — carrying a Zacks Rank #3 (Hold) — has a trailing four-quarter earnings surprise of roughly 6.6%, on average.

Price and Consensus: CTRA

Antero Resources: It is an independent energy producer focused on natural gas and liquids in the Appalachian Basin. Headquartered in Denver, this Zacks #3 Ranked  company develops low-cost assets in the Marcellus and Utica shales, holding about 515,000 net acres. Antero Resources’ production mix is weighted toward natural gas and NGLs, with minimal oil exposure. AR is also one of the largest U.S. suppliers of natural gas and LPG to export markets.

Antero Resources is supported by its midstream affiliate, Antero Midstream, in which it owns roughly 29%. This integrated setup secures transportation and market access from Appalachia to the Gulf Coast. A low debt profile and steady drilling results provide flexibility and support long-term growth.

The Zacks Consensus Estimate for Antero Resources’ 2026 earnings per share indicates 88.3% year-over-year growth. Over the past 60 days, the Zacks Consensus Estimate for its 2026 earnings has moved up from $3.20 per share to $3.76.

Price and Consensus: AR

APA Corporation: It is an independent oil and gas producer with a broad mix of shale and conventional assets. Its core operations span the Permian Basin in the United States, onshore Egypt and the North Sea, with offshore exploration underway in Suriname. This #3 Ranked  company’s long history dates back to 1969, with a reorganization under APA Corporation in 2021. Production remains oil weighted, though natural gas exposure is expected to rise as Egypt continues to ramp.

APA’s asset base offers multiple growth levers. Egypt’s natural gas acreage carries meaningful upside under improved pricing, while Suriname provides long-term exploration potential through a capital-light joint venture. Cost-saving initiatives and disciplined spending further support flexibility across cycles.

APA beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. It has a trailing four-quarter earnings surprise of roughly 32%, on average. APA has a market capitalization of some $8.7 billion and carries a Value Score of A.

Price and Consensus: APA

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Coterra Energy Inc. (CTRA): Free Stock Analysis Report
 
APA Corporation (APA): Free Stock Analysis Report
 
W&T Offshore, Inc. (WTI): Free Stock Analysis Report
 
Antero Resources Corporation (AR): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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