In a note published Wednesday, Nomura Securities energy analysts lowered their estimate of second-quarter net losses by 26% over their coverage universe of 35 exploration and production (E&P) companies. The good news is that only 3 companies are now expected to make larger losses than originally forecast, and the rest have either narrowed their estimated shortfall (20), had no change made to the prior estimate (five) or have been tagged to break even or make a profit (seven).

Rising crude oil and natural gas prices have put some air under producers’ stocks and that should help them juggle increasing drilling activity and stabilizing their balance sheets. Management, says Nomura, must “strike a tone of flexibility; a balancing act.” That balancing act depends on how successful the companies can be at persuading markets that their assets are top-tier.

Nomura looks at Wednesday’s announcement from Diamondback Energy Inc. (NYSE: FANG) of its $560 million acquisition of acreage in the southern Delaware Basin. The analysts write:

On the surface, the $27k/acre entry fee comes at a clear premium to the ~$10k/acre ballpark of recent Delaware deals, but is a testament to the improving sentiment and returns in the Delaware Basin … The deal also makes sense given FANG’s current premium valuation and demonstrated capital efficiency abilities, and comes at a lower acreage cost than recent high-water mark deals on the Midland Basin side.

In addition to Diamondback, which Nomura expects to post a profit of $0.21 per share in the second quarter, the analysts are expecting a $0.22 per share profit from EP Energy Corp. (NYSE: EPE); $0.09 per share from Laredo Petroleum Inc. (NYSE: LPI); $0.08 per share from Concho Resources Inc. (NYSE: CXO); and $0.05 per share from Newfield Exploration Co. (NYSE: NFX). Only two producers, Denbury Resources Inc. (NYSE: DNR) and Parsley Energy Inc. (NYSE: PE) are tagged to break even in the quarter.

The three firms that are expected to post larger losses in the quarter include Canada’s Suncor Energy Inc. (NYSE: SU) and Encana Corp. (NYSE: ECA), both of which suffered from closures related to the massive wildfire in Alberta, and are now expected to post per share losses of $0.38 (down from a prior per share profit estimate of $0.04) and $0.08 (versus a prior loss estimate of $0.05), respectively. Nomura’s estimate for Pioneer Natural Resources Co. (NYSE: PXD) has been lowered from a per-share loss of $0.39 to a loss of $0.40.

Nomura also updated its commodity price deck for the rest of this year. The analysts raised their second-quarter price estimate for West Texas Intermediate (WTI) from $40.85 to $45.53 a barrel; their third-quarter estimate from $42.57 to $46.76; and the fourth-quarter estimate from $43.74 to $47.32; as well as boosted the full-year WTI price from $40.14 to $43.26 a barrel.

Rising second-quarter commodity prices squeezed out short sellers, Nomura says, and the analysts expect rig counts to rise, especially at “several better positioned operators.” Hedging is expected to increase incrementally with rising commodity prices as well.

U.S. crude oil production dropped by approximately 580,000 barrels a day in the second quarter, added to a 211,000 barrel a day decrease in the first quarter, sending overall supply down by about 8.5% at the end of the second quarter. Nomura is looking for “higher declines in late 2016 as most operators look for better visibility before re-accelerating [new drilling] ….”

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