Every time we have a pullback in oil, and then in the energy stocks, the same reasons are cited by Wall Street. Concerns about global growth, especially in China and Europe. Fears of a West Texas Intermediate (WTI) imbalance as back-end loaded supply outlook meets lower demand in the form of seasonal refinery turnarounds and infrastructure delays. Plus, the end of the quarter is just two weeks away and portfolio managers with gains will take them. Toss in a little strength in the U.S. dollar, and you have the makings of a good sell-off.
In a new report, the energy team at Deutsche Bank are not aggressively pushing the sector as a whole. They believe that the time is right to revisit single stock ideas. We screened their top energy stocks to buy, and found the five companies with the most upside to the Deutsche Bank price target.
Anadarko Petroleum Corp. (NYSE: APC) is not only a top stock to buy at Deutsche Bank, but some think the company is a very possible acquisition target. The company is one of the biggest independent oil and gas producers in the country, with exploration or production work in all major domestic drilling areas, as well as in South America, Africa, Asia and New Zealand. The Deutsche Bank analysts feel that with the resolution of the Tronox liabilities, the Wall Street focus may shift back to the positive underlying operating trends and the potential for further monetization and sell-down of major assets in 2014 and next year.
Deutsche Bank has a $137 price target on the stock. The Thomson/First Call consensus target is set at $125.14. Anadarko closed Tuesday at $107.01 a share.
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Concho Resources Inc. (NYSE: CXO) is a top energy play in the Permian Basin in West Texas, which is continuing to explode with production. The company is also mentioned on Wall Street as yet another possible takeover candidate. Concho completed a successful secondary stock offering back in the summer, which raised close to $1 billion. The company is using the net proceeds from the offering to repay debts under the company’s credit facility, as well as for corporate purposes that include financing its three-year accelerated growth plan, capital expenditures tied to the midstream joint venture and potential future asset buys.
Deutsche Bank has a $162 price target for Concho Resources. The consensus price target is slightly higher at $164.25. The stock closed Tuesday at $133.65.
EOG Resources Inc. (NYSE: EOG) is another top stock that looks like a potential takeover candidate. The company is fueling record oil and natural gas production that is helping to revolutionize the U.S. energy position. Its position in the three biggest tight oil plays makes it a huge player in the exploration and production field. EOG is the top producer in the Eagle Ford Shale, and it has solid positions in both the Bakken and Permian Basin, making it a perfect fit for an integrated looking to expand in those areas.
EOG investors are paid a tiny 0.4% dividend. Deutsche Bank has a $125 target set. The consensus target for the stock is $122.34. Shares closed Tuesday’s trading at $105.22.
EQT Corp. (NYSE: EQT) is expected to have a stunning 99% of its production come in as natural gas. This may prove huge for investors if another ruthless winter shows up, which some are now predicting. The company’s superior cost structure and above-average growth may help it exploit stable and rising natural gas prices. With an increasing reserve structure and a projected higher number of Marcellus wells to be drilled in the coming five years, the company exhibits industry-leading organic growth momentum.
Investors in EQT are paid a tiny 0.1% dividend. Deutsche Bank has a large $130 price target, and the consensus target is set at $119.65. Shares ended Tuesday at $95.66.
Gulfport Energy Corp.‘s (NASDAQ: GPOR) principal properties are located along the Louisiana Gulf Coast; in the Utica Shale, eastern Ohio; in the Niobrara Formation, northwestern Colorado; and in the Bakken Formation, western North Dakota and eastern Montana. Deutsche Bank sees Gulfport as one of the best pure plays on the Utica Shale, and the analysts also forecast further delineation, downspacing pilots and infrastructure additions leading to higher market implied Utica Shale values, a huge positive for the company.
Deutsche Bank has an $80 price target on Gulfport, and the consensus number is $75.38. Shares closed trading on Tuesday at $58.19.
ALSO READ: UBS Sees 4 Large-Cap Energy Stocks as Possible Acquisition Targets
While acknowledging that the peak in oil prices was exacerbated by geopolitical issues, the Deutsche Bank team makes a solid case for owning selective top energy stocks, especially the self-funded stocks like EOG, in which growth is available on a much easier trajectory than highly leveraged stocks.
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