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5 Newly Minted Narrow-Moat Oil and Gas Firms

We think these elite producers have sustainable competitive advantages.

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Dave Meats: We recently awarded narrow moat ratings to five of the lowest cost upstream oil and gas producers in our coverage universe. These are Concho Resources, Continental Resources, Diamondback Energy, EOG Resources, and Pioneer Natural Resources. These are the firms we think can sustainably earn their cost of capital.

We believe North American shale is the source of the marginal oil barrel, but not all shale is marginal. The firms we've highlighted enjoy a significant cost advantage because their acreage is located more favorably in areas that typically yield more volumes for each [unit] of capital invested. On average, new wells in these juicy acreage areas deliver more bang for the buck, supporting lower unit costs and thus, stronger margins for the firms in this select group.

Dave Meats does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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