Without a doubt, the Permian Basin has been one of the top-producing areas for U.S. energy companies over the past few years. While many analysts see a production decline coming, if a recent well that hit the jackpot is any indication, that pronouncement may be premature.
In a new SunTrust Robinson Humphrey research report, the energy team notes that Devon Energy Inc. (NYSE: DVN) reported Monday that two wells are producing the largest 24-hour initial production rates in the United States. The Boundary Raider 6-7 Com 212H and 213H both flowed at a stunning 11,000 barrels of oil equivalent per day. The analyst also points out that flow rates are some of the largest ever seen in the Permian Basin and the United States, with the previous high in the region being 6,500 barrels of oil equivalent per day.
The analysts also feel that this could be a big positive for operators in the region that are near the Devon find. The wells are located on the border of Lea and Eddy counties in New Mexico. SunTrust says that while few details are available on the wells, they appear to target the 2nd Bone Spring with roughly two-mile laterals. We cross-referenced the companies mentioned, looking for Buy ratings in our 24/7 Wall St. research database.
EOG Resources
This leading energy company shows up well on many Wall Street screens. EOG Resources Inc. (NYSE: EOG) is one of the largest independent exploration and production companies operating in the United States, Canada, Trinidad, the United Kingdom and China.
The company has a big well in Loving County in the Delaware Basin. Top analysts say the well ranks as one of the best they have ever seen in the basin, and it could easily impact other companies drilling in the region. EOG’s average dollar gross per well on a yearly basis is a stunning $4.3 million, which ranks third among all operators.
The SunTrust team says that EOG has the largest acreage position to the southeast side of where the Devon wells are located.
Shareholders receive just a 0.62% dividend. Stifel has a price target of $149, while the Wall Street consensus target for the shares is $126.69 The stock closed trading on Wednesday at $116.65.
[nativounit]
Exxon
This remains a top Wall Street energy pick and is on the US 1 list at Merrill Lynch. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
Recently, Exxon announced estimated first-quarter 2018 earnings of $4.7 billion, or $1.09 per share assuming dilution, compared with $4.0 billion a year earlier. Cash flow from operations and asset sales was $10 billion, including proceeds associated with asset sales of $1.4 billion. In addition, Exxon has raised the dividend by $0.05 per share to $0.82. That now translates to a nifty 4.27% dividend.
The analysts noted that through an acquisition from the Bass brothers, Exxon has acreage that surrounds the north, south and west side of the position of the Devon wells.
The Merrill Lynch price objective is $100, and the consensus estimate is much lower at $85.98. Shares closed Wednesday at $86.80.
[recirclink id=460375]
Occidental Petroleum
This is another one of the highest yielding domestic stocks in the energy sector. Occidental Petroleum Corp. (NYSE: OXY) is an oil-levered multinational organization with principal business segments in oil and gas and in chemicals. The oil and gas segment explores for, develops, produces and markets crude oil and natural gas, primarily in the U.S. Permian Basin, Colombia, Bolivia, Libya, Oman, Qatar and Yemen. The chemicals segment manufactures and markets basic chemicals, vinyls and performance chemicals.
With a rock-solid balance sheet and a commitment to dividend coverage, investors look safe for now. Occidental has paid quarterly cash dividends continuously since 1975, and it has increased its dividend each year since 2002.
The analysts point out that Occidental appears to be the closest to the wells with a potential interest, based on their data.
Shareholders receive a 4.02% dividend. The $86 Piper Jaffray price target compares with a consensus target of $78.86 and the most recent close at $76.83.
Cimarex Energy
This smaller company is another top play for investors looking to the Permian Basin, and it also has decent proximity to the massive Devon wells. This is a top play for investors looking to the Permian Basin, though it was started with a Hold rating at Jefferies. Cimarex Energy Co. (NYSE: XEC) is an independent exploration and production company. Its primary activities are in the Mid-Continent and Permian Basin areas of the United States.
The company is focused on increasing shareholder value through strategies linked to generating attractive economic returns on capital employed and profitable growth in per-share reserves, production and cash flow. It intends to profitably grow reserves and production through a balanced mix of exploration, exploitation and acquisitions.
The analysts cite the company’s scattered position around the wells as a positive.
Investors receive a 0.65% dividend. SunTrust has set its price target at $120. The consensus target is much higher at $134.58, but shares closed Wednesday at $98.51.
[recirclink id=460333]
WPX Energy
This smaller capitalization company with solid upside potential and is another top Permian Basin play with decent proximity to the massive Devon wells. WPX Energy Inc. (NYSE: WPX) is an independent oil and natural gas exploration and production company focused on unconventional properties in the United States. Its principal areas of operation include the Permian Basin in Texas and New Mexico, 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 valuations primarily due to its relatively high financial leverage. WPX has what the analysts term the “blockiest” nearby position to the Devon Wells.
The SunTrust price target is $22. The consensus price objective is $20.36, and the stock closed Wednesday at $17.41.
[wallst_email_signup]
These new finds could challenge all the conventional wisdom that production in the Permian is destined to decline. While it still may in 2019, the drop off may not be near as rapid as currently expected.
Top Gaining Stocks
Top Losing Stocks