• Oil prices have been rallying, driven by tightening global supplies, geopolitical concerns and a dovish shift in U.S. regulations. 
  • The Permian Basin, a key driver of U.S. crude production, stands to benefit from energy-friendly policies under the second Trump administration.
  • Diamondback Energy and Matador Resources—both operating in the Permian Basin—look well-positioned to capitalize on these favorable developments. 


Oil prices are on the rise, and the energy sector is feeling the burn. A mix of tightening supply, shifting geopolitical dynamics and changes in regulations under the second Trump administration is fueling this rally. Against this backdrop, the Permian Basin in West Texas and southeastern New Mexico has returned to the spotlight. It’s responsible for nearly half of U.S. oil production,


Permian-focused energy stocks have been on an impressive run over the past year, and with the political winds shifting in their favor, 2025 could deliver even more upside. The region’s dominance in U.S. oil production, combined with pro-energy policies, sets the stage for continued growth. In this article, we spotlight two key players in the region—Diamondback Energy (FANG) and Matador Resources (MTDR)—both primed to take full advantage of the ongoing momentum.


Oil prices rebound on latest sanctions and supply concerns


Crude oil prices have experienced an impressive rebound in recent months, climbing from around $67 per barrel in early December 2024 to nearly $80 per barrel by mid-January. Several factors caused the surge, including stringent U.S. sanctions on Russian oil exports, a substantial drawdown in U.S. crude inventories and ongoing geopolitical tensions.


In early January 2025, the U.S. introduced its toughest sanctions on Russian oil yet, targeting over 160 tankers that transport Russian and Iranian crude. These measures disrupted established supply chains, affecting major consumers like China and India, which had previously relied heavily on Russian oil. As a result, more countries have been forced to find alternative sources, tightening available supply and driving prices upward.


Amid these developments, the new Trump administration is reportedly considering two distinct strategies regarding Russia, adding another layer of uncertainty to the global energy markets. One approach—a “carrot-and-stick” strategy—would involve easing sanctions on Russian oil as a potential incentive for a peace deal in Ukraine. That would potentially allow Russian crude to return to the market in larger volume, increasing supply and weighing on prices.


Alternatively, the Trump administration could take a more aggressive approach by tightening sanctions, further restricting Russian oil exports, to ratchet up the pressure on the Kremlin. This “all stick” strategy would probably push oil prices even higher. With both strategies still under consideration, the oil market faces uncertainty, awaiting clarity on the new administration’s chosen path.


But as the situation develops, opportunities may develop, whether it be in oil-focused stocks, exchange-traded funds (ETFs) or futures. As of Jan. 19, crude oil trades for about $77 per barrel, as highlighted below. 



Permian Basin: the driving force behind U.S. oil production


The Permian Basin, now responsible for roughly 46% of U.S. crude oil production, has become a key focus for investors in the energy sector. Energy policies aimed at encouraging domestic production and strengthening energy independence, could receive a notable boost during President Trump’s second term. During his first term, Trump championed the development of U.S. energy resources by rolling back regulations and opening more federal lands for exploration. A continuation of these policies is likely to benefit the Permian, reinforcing its position in U.S. oil production.


On his first day in office, President Trump declared an “energy emergency” and signed new orders promoting fossil fuel development in Alaska. These moves should help develop the nation’s key energy regions, including the Permian Basin. In 2024, the Permian region pumped out 6.3 million barrels of production per day. Current projections suggest the region’s output could surge to between 7.5 and 8.0 million barrels per day by 2030. And with a fossil fuel supporter now in the Oval Office, those numbers could climb further. 


Because of the region’s strategic importance, it has become a hotbed of merger and acquisition (M&A) activity. Companies of all sizes have been keen to consolidate their operations in this highly productive region. A notable example was the $60 billion Exxon Mobil (XOM) acquisition of Pioneer Natural Resources (PXD) in 2023. Other examples include the Occidental (OXY) purchase of Anadarko Petroleum (APC), the ConocoPhillips’ (COP) acquisition of Permian assets from Shell (SHEL) and the APA(APA) acquisition of Callon Petroleum (CPE) for $4.5 billion.  CNJ


Considering this dynamic, it’s virtually assured other high-profile deals will be announced in 2025. As a result, the Permian stands out not only as a cornerstone of the U.S. energy sector, but also as a highly attractive niche for energy-focused investments.


Two Permian stocks to consider in 2025


With the Permian Basin continuing to dominate U.S. oil production, two companies stand out as top contenders for 2025. Diamondback Energy (FANG), with a rapidly growing market cap over $50 billion, has become a major force in the region. Meanwhile, Matador Resources (MTDR), valued at approximately $8 billion, is strategically positioned for potential acquisition, making it an intriguing prospect for investors. Additional details on these two companies are highlighted below. 


Diamondback Energy


Diamondback Energy, with a market capitalization exceeding $50 billion, is one of the largest and most influential players in the Permian Basin. The company has a strong presence in the Midland Basin and has grown rapidly through both organic operations and strategic M&A. Most recently, Diamondback completed a merger with Endeavor Energy Resources in September 2024, which is expected to create over $3 billion in synergies. The company also maintains a robust portfolio of royalty interests through its majority stake in Viper Energy (VNOM), offering investors exposure to a diversified mix of assets within the Permian.


Diamondback’s most recent earnings report for Q3 2024 showed strong revenue growth, with a 19% year-over-year increase, totaling $2.64 billion. However, net income was down 28% from the previous year, in part because of costs associated with the Endeavor acquisition. Likewise, the company posted earnings per share (EPS) of $3.19, which was a decline from the $5.07 reported in Q3 2023. Despite missing EPS expectations, Diamondback exceeded revenue forecasts by nearly 10%, signaling that its operations are still performing well, albeit under some cost pressure. Looking ahead, the company anticipates growing benefits from the Endeavor acquisition, with oil production expected to steadily rise to between 335,000 and 337,000 barrels per day in 2025, up from 273,000 to 276,000 barrels per day in the previous year.


From a valuation perspective, Diamondback’s stock trades at a GAAP TTM P/E ratio of 10.40, which is notably lower than the sector median of around 12.70. This suggests the company might be undervalued relative to its peers, especially considering its dominant position in the Permian and the potential upside from the Endeavor acquisition. Analyst sentiment is overwhelmingly positive, with 28 of the 34 analysts covering the stock rating it as “buy” or “overweight” and none advising a “sell.” This reflects confidence in Diamondback’s prospects for growth, particularly with the anticipated synergies from the Endeavor deal and its disciplined capital management strategy. Additionally, the company’s track record of share buybacks and dividend growth reinforces its strong appeal as a long-term investment.


Diamondback Energy is well-positioned for growth, supported by a low breakeven price, a strong balance sheet and a shareholder-focused strategy. Its dominant presence in the Permian Basin, coupled with a solid growth outlook enhanced by the Endeavor acquisition, makes it a compelling option for investors. Trading at roughly $175 per share, well below the average analyst target of $215/share, Diamondback also offers near-term upside potential, making it an attractive choice for energy-focused investors in 2025. Over the last 52 weeks, shares of Diamondback have risen by roughly 20%. 



Matador Resources


Matador Resources, with a market capitalization of around $8 billion, has solidified its position as a key player in the Delaware Basin, an integral part of the larger Permian Basin. The company has steadily grown its output through strategic acquisitions, including the recent $1.8 billion purchase of Ameredev II, which closed in September. This acquisition is expected to contribute approximately 31,500 BOE (barrel of oil equivalent) per day in production, further strengthening Matador’s foothold in this high-potential region.


Focused on operational efficiency and cost reduction, Matador has delivered strong results, including a 20% year-over-year revenue increase in Q3 2024, totaling $860 million. However, net income did fall slightly in Q3, because of rising operating expenses. This resulted in an EPS of $1.99 for the quarter, down marginally from $2.21 in Q3 of last year. Despite this dip in profitability, the company’s solid growth trajectory and attractive positioning in the Permian continue to make it an appealing prospect for investors.


Along those lines, Matador’s P/E ratio (GAAP, TTM), hovering around 8.40, is well below the sector’s 12.70 median. This discount, paired with Matador’s dominance in the Delaware Basin and its recent acquisition of Ameredev II, arguably make the company a prime target for acquisition. With a market cap still under $10 billion, Matador sits in the sweet spot for larger energy players looking to expand their portfolios. Analyst sentiment supports this view, with 21 of 22 analysts recommending “buy” or “overweight” on Matador’s stock, and no one advising “sell.”


Looking ahead, Matador is on track to exceed 200,000 BOE per day in production by 2025, thanks to strategic moves like the Ameredev deal and its focus on operational improvements. The company is also poised to generate more than $7 per share in free cash flow, which could support even higher dividends in the future. With a solid track record of returning capital to shareholders and a clear upward growth trajectory, Matador offers both capital appreciation and income potential. The stock trades at about $63 per share, well below the average analyst price target of $75 per share, which also implies attractive upside potential. 



A brighter outlook for energy investments in 2025


With Trump’s second term underway, the energy sector finds itself on the cusp of a transformative shift, one that could favor the powerhouse Permian Basin. Having advocated for energy independence and domestic oil production in his first term, Trump is once again championing policies that place U.S. oil at the forefront of the global energy market. As a result, the Permian Basin appears likely to remain a centerpiece of the country’s near-term energy strategy. 


In this context, we’ve highlighted two companies—Diamondback Energy and Matador Resources—that stand out as compelling opportunities for investors. Both have solid track records, attractive positioning in the Permian and promising growth prospects. That said, the Permian landscape isn’t limited to just these two names. Other attractive Permian operators include Permian Resources (PR), Range Resources (RRC) and SM Energy (SM), which have all posted impressive gains over the last 52 weeks. 

Andrew Prochnow has more than 15 years of experience trading the global financial markets, including 10 years as a professional options trader. Andrew is a frequent contributor Luckbox magazine.

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