Analyst Gets More Positive on Top Eagle Ford Shale Oil Stocks

By Lee Jackson Published Apr 20, 8:30AM EDT

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While the long slide in oil pricing may have finally settled into what could be a longtime sideways move, some firms we cover on Wall Street are getting incrementally more positive on some of the top exploration and production (E&P) companies. A new report from SunTrust Robinson Humphrey raises price targets on some of the leading stocks to buy that are focusing on the Eagle Ford formation in South Texas.

The SunTrust team points out that even with prices declining, the best companies have reached what they call “shale scale” with very efficient operations that are providing highly economic returns, some in excess of 30%. The firm is raising price targets on three of the four top stocks to buy. Carrizo Oil & Gas Inc. (NASDAQ: CRZO), Earthstone Energy Inc. (NASDAQ: ESTE), Penn Virginia Corp. (NYSE: PVA) and Sanchez Energy Corp. (NYSE: SN). All are rated Buy at SunTrust.

Carrizo Oil & Gas

This Houston-based energy company is actively engaged in the exploration, development and production of oil and gas from resource plays located in the United States. Carrizo’s current operations are principally focused in proven, producing oil and gas plays primarily in the Eagle Ford Shale, the Utica Shale in Ohio, the Niobrara Formation in Colorado and the Marcellus Shale in Pennsylvania.

The SunTrust team sees the company as one of the best positioned due to the low break-even costs, solid operating scale and a very good balance sheet with ample liquidity. The analysts also think they company may take advantage of difficult situations for others and make acquisitions, especially in the Eagle Ford.

SunTrust raised its price target on the stock from $60 to $65. The Thomson/First Call consensus target is posted at $56.75. Shares closed Friday at $53.73.

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Earthstone Energy

This independent oil and gas E&P company is engaged in the development and acquisition of oil and gas reserves through an active and diversified program that includes the acquisition, drilling and development of undeveloped leases, and purchases of reserves and exploration activities, with its current primary assets located in the Eagle Ford trend and in the Williston Basin of North Dakota and Montana.

This is another company the analysts feel could be looking to grow via acquisitions. They also point out the company has a very strong balance sheet, with over $100 million in cash, and another $80 million available.

The SunTrust price target stays at $35, and the consensus target is $30.89. The stock closed on Friday at $24.85 a share.

Penn Virginia

This is a small-cap stock that could hold big promise, especially for more speculative accounts looking to add a higher amount of shares. Penn Virginia is an independent oil and gas company engaged in the exploration, development and production of oil, natural gas liquids and natural gas in various domestic onshore regions of the United States, with a primary focus in the Eagle Ford Shale.

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With virtually no corporate chatter from the company during the first quarter, the analysts are anxious to hear the company’s strategic commentary for the future. While they like the Eagle Ford acreage, with large operators nearby the well economics may not be as favorable. Penn Virginia could be a company others look at as an acquisition possibility.

The SunTrust price target is raised to $11 from $10. The consensus target is $9.14. Shares closed trading Friday at $7.46.

Sanchez Energy

This one is an independent E&P company focused on the acquisition and development of unconventional resources in the onshore U.S. Gulf Coast with a current focus on the Eagle Ford Shale, where it has assembled approximately 226,000 net acres, and the Tuscaloosa Marine Shale.

Sanchez is another company that the analysts are very bullish on, and they cite similar very impressive traits as with Carrizo. Again, they are very low break-even costs, good operating scales and a very solid and stable balance sheet with outstanding liquidity. The SunTrust team also is expecting very positive well results from Sanchez’s Catarina area.

The SunTrust price target is lifted to $22 from $20. The consensus is much lower at $16.63. The stock finished the day Friday at $14.80.

ALSO READ: Is Kinder Morgan Now the Perfect Energy Stock?

All these companies appear to really have hunkered down and avoided getting engulfed in the oil price decline. With solid balance sheets and very good forward prospects, they make sense for aggressive growth accounts looking to add independent E&P companies. Any of these four could be on the radar screen of a bigger company looking to add production.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.