Most investors who own energy stocks are well aware of the Permian Basin. It reaches from just south of Lubbock, Texas, to just south of Midland and Odessa, extending westward into the southeastern part of New Mexico. Several component basins comprise the greater Permian Basin. Of these, the Midland Basin is the largest, the Delaware Basin is the second largest and the Marfa Basin is the smallest.

A new research report from SunTrust Robinson Humphrey notes that EOG Resources Inc. (NYSE: EOG) just reported to the Texas Railroad Commission a big well in Loving County in the Delaware Basin. The analysts say the well ranks as one of the best they have ever seen in the Delaware and could easily impact other companies drilling in the region.

The find affects numerous companies in the SunTrust coverage universe, with the following four being specifically mentioned in the report. All are rated Buy at the firm.

Concho Resources

Besides being one of the top energy plays in the Permian Basin, this is also a Wall Street favorite. Concho Resources Inc. (NYSE: CXO) is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties. Its principal operating areas are located in the Permian Basin of southeast New Mexico and West Texas, where it owns 600,000 net acres. The company has 624 million barrels of oil equivalent of proven reserves, of which 57% is classified proved developed and 59% is oil.

The company is targeting to deliver 20% oil production growth this year, while investing within its cash flow, a move that many on Wall Street see as very positive. By carefully managing growth and spending, the company looks to be in position to restart the double-digit production growth next year, while many peers are struggling to generate enough excess cash flow to boost output.

The SunTrust analysts feel that the company’s debt load is below average, as is the firm’s commodity price sensitivity, both which are big positives for investors.

The SunTrust price target for the stock is $175, and the Wall Street consensus target is $164.29. Shares closed on Friday at $129.22.

Energen

This lesser known company is a solid choice for those looking for Permian Basin exposure at a reasonable price. Energen Corp. (NYSE: EGN) is an oil and gas exploration and production company with headquarters in Birmingham, Alabama. The company has approximately 775 million barrels of oil-equivalent proved, probable and possible reserves and another 2.5 billion barrels of oil-equivalent contingent resources. These all-domestic reserves and resources are located primarily in the Permian Basin.

Top analyst feel that Energen is a rare breed, with strong debt-adjusted growth, inventory depth from a quality and blocky Permian footprint, balance sheet and value. Recent Generation 3 completions show promise for a step-change in well productivity, and none of that appears baked into guidance or street estimates.

SunTrust has a $70 price target, and the consensus target is $70.50. Shares closed Friday at $54.54.

Matador

This company has been mentioned recently as a potential takeover target. Matador Resources Co. (NYSE: MTDR) is an oil and gas producer with 142,000 net acres in the Permian Basin, Eagle Ford and Haynesville shale plays. Focus has shifted to the Permian, where Matador has a 89,000 net acre position in the Delaware Basin. Since its initial public offering, Matador has grown its Permian acreage by more than tenfold as a result of acquisitions and has 1,284 net horizontal locations across nine prospective zones.

With the exception of drilling five Eagle Ford wells, Matador’s updated guidance estimates include four drilling rigs operating in the Delaware Basin in the first quarter of 2017, with a fifth drilling rig added in the Delaware Basin in the second quarter of 2017. For 2017, Matador expects to direct 93% of its estimated capital expenditures to drilling and completion and midstream activities in the Delaware Basin.

The $35 SunTrust price target compares with the consensus target of $30.76. Shares ended last week at $23.69.

WPX Energy

This is another smaller cap company with solid upside potential. WPX Energy Inc. (NYSE: WPX) is an independent oil and natural gas company that engages in the exploitation and development of unconventional properties in the United States. Its principal areas of operation include the Permian Basin, the Williston Basin in North Dakota and the San Juan Basin in New Mexico and Colorado.

WPX is a premier Permian-levered operator with sector leading debt-adjusted cash flow growth supported by strong execution in the core Delaware, all while trading at a Williston Basin valuation primarily due to its relatively high financial leverage.

The SunTrust price objective is $24. The consensus target is $18.48, and shares closed on Friday at $13.00.

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These companies are trading well below their 52-week highs, and with all the potential catalysts in front of them they make solid buys now. Investors may want to buy partial positions and see how first-quarter earnings come out.

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