PrimeEnergy Gains 35% in 3 Months: Time to Bet on the Stock or Wait?

PrimeEnergy Resources Corporation PNRG has rallied 35% over the past three months, significantly outperforming the industry composite’s 8.4% return. Among its upstream peers, SM Energy SM has advanced 15.4%, while Comstock Resources CRK has declined 18.9% over the same period.

While this recent outperformance is noteworthy, stock price movement alone should not drive an investment decision. A closer look at PrimeEnergy’s operational strategy, financial strength and broader industry backdrop provides a clearer picture.

Operational Strategy & Asset Diversification

PrimeEnergy is an independent oil and natural gas company focused on the acquisition, development and production of properties primarily in Texas and Oklahoma. The company emphasizes horizontal drilling in the Midland Basin of West Texas, targeting multiple pay zones within the Wolfcamp and Spraberry formations. Currently, PrimeEnergy operates 508 wells across Texas and Oklahoma.

Its development strategy centers on disciplined capital allocation, responsible reserve development and maintaining strong liquidity. In West Texas alone, the company controls acreage that could support up to 100 additional horizontal drilling locations, offering a meaningful growth runway.

Beyond its core upstream portfolio, PrimeEnergy benefits from asset diversification. The company holds a 12.5% overriding royalty interest in roughly 30,000 acres in West Virginia, owns a currently idle offshore pipeline in Texas and maintains a 33.3% stake in a retail shopping center in Alabama. These non-core assets provide optional monetization opportunities and add a layer of diversification to its revenue base.

Operationally, PrimeEnergy has remained active. The company invested $96 million in drilling 35 horizontal wells in 2023 and followed that with $113 million deployed across 48 horizontal wells in 2024. Additional investments are planned for 2025. In the third quarter of 2025, production reached 505 MBbl of oil, 2.3 Bcf of natural gas and 362 MBbl of natural gas liquids (NGLs). Although oil production from mature assets has experienced natural declines, higher natural gas volumes and improved pricing have helped lift gas revenues.

Energy Outlook & Implications for PrimeEnergy

Per the U.S. Energy Information Administration, Brent crude oil prices are projected to decline to $56 per barrel in 2026 and $54 in 2027 as global supply exceeds demand. U.S. crude oil production, after reaching record levels in 2025, is also expected to moderate slightly.

In contrast, Henry Hub natural gas prices are forecast to average between $4.30 and $4.40 per MMBtu in 2026-2027, supported by rising LNG exports and stronger demand from the power sector. U.S. dry gas production is projected to grow modestly, suggesting 2% growth in 2026 and 1% in 2027.

For PrimeEnergy, a softer oil price environment could weigh on oil revenues and drilling economics. However, stronger natural gas fundamentals, coupled with rising LNG demand, may provide support to the company’s gas and NGL production, helping stabilize cash flows. While oil markets may face headwinds, improving natural gas dynamics could offer longer-term operational support.

What Should Be Investors’ Ideal Move Now?

PrimeEnergy’s balance sheet strength stands out in the capital-intensive upstream industry. As of Sept. 30, 2025, the company had no outstanding debt and retained full availability under its $115-million revolving credit facility. This debt-free position provides flexibility to pursue acquisitions, invest in organic development or return capital to shareholders without relying on external financing. Strong liquidity also offers a cushion against commodity price volatility.

Investors should note that PNRG’s debt-to-capitalization ratio of 0.59% is substantially lower than the industry average of 49.9%.

From a valuation perspective, PNRG trades at a trailing 12-month EV/EBITDA multiple of 2.57X, well below the broader industry average of 10.89X. The discounted valuation may reflect commodity price risks but also indicates an upside if operational momentum continues.

Overall, while PrimeEnergy’s solid balance sheet, active development program and discounted valuation are encouraging, commodity price uncertainty warrants caution. Investors who have already invested in the stock can retain their position while monitoring developments in the oil and natural gas markets.

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

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