Energy

6 Oil and Gas Stocks Analysts Want You to Buy Now

While this past week was rocked down and back up by the woes of China and Greece, investors keep looking for value and opportunity. The trend of investors buying every dip has lasted for nearly four years. With the oil and gas sector having fallen so hard in the past year, many long-term investors have been searching for oversold stocks and hidden value where they can find solid upside in the next year or in the years ahead.

24/7 Wall St. reviews dozens of analyst upgrades and downgrades each day. The goal is to find the hidden value or upside calls that stand out above the rest of the pack. Analysts are far from omniscient, and investors have to assume that even the best oil and gas outfits will not bring a happy ride if oil heads back down toward $40 again.

These are some of the top oil and gas analyst calls shown from this past week. We have provided some links to more detail in some of the calls, and the second page offers more calls that stood out as well in the oil and gas sector.

ConocoPhillips (NYSE: COP) may be large with a $73 billion market value, but independent research firm Argus sees shares fairly valued at about 40% higher. In the middle of this past week, the firm reiterated its Buy rating and raised its price target to $82 from $75. Argus said that a combination of major long-cycle and unconventional short-cycle projects will enable ConocoPhillips to generate shareholder value in a range of commodity price environments. The consensus price target for the stock is $74.35, and the 52-week trading range is $58.08 to $87.09. Friday’s closing price of $59.13 and the 4.9% dividend yield leaves over 40% implied upside.

Spectra Energy Corp. (NYSE: SE) lives around natural gas, so it has been muted. Still, Argus came out late last week and reiterated its Buy rating and price target of $40.00 (versus $31.04 prior close and the $31.28 Friday close). This target is almost $2.50 above the consensus price target, and if Argus is right then it implies expected returns of more than 30%, if you include dividend payments. The Argus call on Spectra was based on Spectra’s solid fee-based businesses, its financial strength and its ability to expand its asset footprint.

ALSO READ: 4 Oil Services Stocks Called to Rise 40% or More

Superior Energy Services Inc. (NYSE: SPN) may be on the equipment and services side of oil and gas, but on Friday its stock was raised to Buy from Hold at Jefferies. What stood out was that after a big drop the firm actually decided to lower its price target to $25 from $28. This compared with a $19.88 prior close, and the stock closed at $19.73 on Friday. It still represents over 28% implied upside when you add in the dividend, and Superior is already down almost 50% from its 52-week high.

Weatherford International PLC (NYSE: WFT) was raised to Buy from Hold at Jefferies late last week, but its price target was cut by $1.00 to $14.00. This compared with a prior $11.48 close and Friday’s closing price of $11.33. What really stands out, besides the call still leaving an implied upside of almost 25%, is that the consensus price target is higher at $15.89. Also, the 52-week range of $9.40 to $24.88 does not exactly imply that a $14 to $16 share price is out of the ordinary.

California Resources Corp. (NYSE: CRC) has sold off far too much, according to Bank of America Merrill Lynch. The firm thinks that this short seller attack has gone too far, that short sellers are misunderstanding the California Resources story and that the research partly behind the short attack simply may be wrong. Here is what really stands out: the $15.00 fair value price objective.

With a recent California Resources share price of $5.26, that implies almost 200% upside. Sure, the call is the most aggressive of all on Wall Street, but Merrill Lynch does not make huge calls like this very often.

Azure Midstream Partners L.P. (NYSE: AZUR) was reiterated as Buy at Janney Capital Markets, but the firm named it a new top pick in the call. On top of raising the fair value target to $30 from $29, this represents more than 100% implied upside to Azure’s current price. How many master limited partnerships (MLPs) get called on to double in price?

Janney thinks that substantial dividend increases should push Azure higher, and the recent share issuance was said to have “derisked the growth story” along with cost savings. At $13.21, Azure has a 52-week range of $10.62 to $24.18 and a consensus analyst price target of $27.40.

ALSO READ: 5 Big Defensive Dividends Trading at Deep Discounts

Other key analyst upgrades in the oil and gas sector from this past week were seen as well, though these certainly are not all of the upgrades and positive calls:

Anadarko Petroleum Corp. (NYSE: APC) was raised to Buy from Hold at Jefferies.

Cameron International Corp. (NYSE: CAM) was raised to Outperform from Sector Perform with a price target of $65 (versus a $50.38 close) at RBC Capital Markets on Friday.

Columbia Pipeline Group Inc. (NYSE: CPGX) was started as Buy with a target price of $33 (versus a $30.34 close) at UBS.

EnLink Midstream Partners L.P. (NYSE: ENLK) was started as Buy with a target price of $27 (versus a $22.25 close) at UBS.

NiSource Inc. (NYSE: NI) was raised to Overweight from Equal Weight at JPMorgan, and the $20 price target was maintained (versus a $17.14 close).

Statoil ASA (NYSE: STO) was raised to Outperform from Neutral at BNP Paribas.

Also, Credit Suisse named three top MLP picks that should do well in a period of rising interest rates. Recent insider buying was highlighted by purchases in Devon Energy and Energy Transfer Partners. And despite lower oil prices, it looks as though the uptick in the oil and gas rig counts has continued.

ALSO READ: 5 Fresh Dividend Hikes That Can’t Be Ignored

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