We all knew the Russians did it. Well, we are not speaking of politics here, but of the politics of oil. Despite a continued worldwide glut of oil, which while diminishing during the busy summer driving season, is still omnipresent, the Russians said recently they will not be cutting production any further. Add to that, many sell-side analysts tossing in the towel recently on the black gold, and many investors are unsure of which way to position their portfolios.

In a new research report from the energy team at SunTrust Robinson Humphrey, while they do slice targets on Permian Basin exploration and production companies due to lower than anticipated oil pricing, they still believe the top companies in the region offer upside as they offer a degree of safety and could move higher when oil prices eventually do.

Four stocks remain the analysts’ favorites, and they consider them their “Flight to Quality” companies. All are rated Buy at SunTrust.

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.

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

The SunTrust price target for the stock is $165, and the Wall Street consensus target is lower at $155.37. The stock closed Friday at $121.57 a share.

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.

The $65 SunTrust compares with the consensus estimate of $65.59. The shares closed most recently at $47.98.

Parsley Energy

This is smaller capitalization stock for aggressive investors to consider. Parsley Energy Inc. (NYSE: PE) is an oil and gas producer with 227,000 net acres in the Permian Basin. The majority of acreage sits on the Midland side of the basin, but the company also holds a small acreage position in the Delaware Basin.

The company had 222 million barrels of oil equivalent of proved reserves at the end of 2016, of which 61% was oil. Through strategic acquisitions and acreage swaps, it has grown its acreage position since its initial public offering and has over 7,900 horizontal locations across multiple prospective zones.

While SunTrust has a $38 price target, the posted consensus target is $41.41. The shares closed Friday at $26.40.

Ring Energy

This is another small cap play that the analysts at SunTrust prefer now. Ring Energy Inc. (NYSE: REI) acquires, explores for, develops and produces oil and natural gas in Texas and Kansas. As of December 31, 2016, its proved reserves consisted of approximately 27.7 million barrel of oil equivalent. The company also owns interests in 32,663 net developed and undeveloped acres in Andrews and Gaines counties, and 20,490 net developed and undeveloped acres in Reeves and Culberson counties, Texas, as well as 14,549 net developed and undeveloped acres in Kansas.

Ring Energy primarily sells its oil and natural gas production to end users, marketers and other purchasers. The company’s long-term business strategy is focused on the exploration, development and acquisition of oil and natural gas properties in the Permian and Mid-Continent regions of the United States.

The company posted solid first-quarter numbers. The oil and gas revenues of $12.2 were almost double compared to the year-ago period, and net income of $1.7 million, or $0.03 per diluted share, compared to a net loss of $15.2 million, or $0.50 per diluted share for the same period in 2016.

SunTrust has set its price target at $19. The consensus figure is $17.73, and the stock closed last Friday at $12.83 a share.

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These are four quality stocks for investors to consider while oil continues to trade in the $40s. While the sector is out of favor, it probably offers the best value for the balance of 2017.

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