Every day is seems like we have seen it. Oil down to 12-year lows, this week dipping under $30 briefly. You may be asking yourself, could it really decline that fast? The answer most likely is no. In fact, worldwide demand and current falling production are not that far apart, and despite the hand-wringing of some on Wall Street, the addition to the markets by Iran is not a game changer, at least initially. The big question on everybody’s mind is where is the bottom?

One thing is for sure, the big integrated oil and giant exploration and production (E&P) companies have been through this before, so they have a game plan for survival. Plus, some on Wall Street are now of the opinion that some of the top smaller E&P companies that have seen gigantic drops in their stock price could become targets. Exxon for instance, bought Mobil in 1999 and XTO in 2009.

We screened the Merrill Lynch research database for companies rated Buy that could also be prime takeover targets. We found three that Big Oil may just find attractive, especially at current prices. Even if they don’t get bought, they would be very good long-term investments at current levels.

Hess

This top pick is down a stunning 50% since last spring. Hess Corp. (NYSE: HES) is an E&P company that develops, produces, purchases, transports and sells crude oil, natural gas and natural gas liquids. The company primarily operates in the United States, Denmark, Equatorial Guinea, the Joint Development Area of Malaysia/Thailand, Malaysia and Norway.

The company has again emerged as the subject of buyout speculation. With a market capitalization falling to just over $11.5 billion, the company could fall prey to larger integrated as a quick bolt-on acquisition to boost growth. Hess is undergoing somewhat of a transition from an integrated oil and gas company to a predominantly E&P entity. The company is shifting its growth approach from high-impact exploration to a smaller, more focused exploration portfolio.

Hess investors receive a 2.53% dividend. The Merrill Lynch price objective is a massive $85, and the Thomson/First Call consensus price target is much lower at $66. The stock closed most recently at $39.60.
Pioneer Natural Resources

Many Wall Street analysts love this stock for a pure crude oil play, and recently it was upgraded by Deutsche Bank and Citigroup. Pioneer Natural Resources Co. (NYSE: PXD) was the ultimate shale-oil growth story over the past five years, but it has been eviscerated in the sell-off that started over a year ago. The stock had rebounded nicely since the summer, but was it hit hard recently and could be offering aggressive investors a very timely potential entry point.

Pioneer is a huge player in the Permian basin and the Eagle Ford in Texas, and the company owns more than 20,000 locations in the world’s second largest oil reservoir in the Midland Basin. Wall Street analysts were very positive on the third-quarter results and noted that the company reiterated annual production growth guidance of 15% or so while cutting the number of rigs expected to operate. With a stellar balance sheet and new capital from a recent secondary offering, the company is poised to remain the number one player in the Permian.

Speculation always swirls that the company could be a takeover target, as a big integrated wanting to make a bold move into West Texas could buy Pioneer. Another reason suitors may be circling is the stock is trading over $100 lower per share from highs set in the summer of 2014.

Pioneer investors are paid a tiny 0.07% dividend. The Merrill Lynch price target is a stunning $175, and the consensus figure is lower at $165.21. Pioneer closed trading on Tuesday at $113.24.

Occidental Petroleum

This is one of the higher yielding domestic stocks in the energy sector. Occidental Petroleum Corp. (NYSE: OXY) is an international oil and gas E&P company with operations in the United States, Middle East and Latin America. Occidental is one of the largest U.S. oil and gas companies, based on equity market capitalization. Its midstream and marketing segment gathers, processes, transports, stores, purchases and markets hydrocarbons and other commodities in support of Occidental’s businesses. In addition, the wholly owned subsidiary OxyChem manufactures and markets chlor-alkali products and vinyls.

The company posted surprising third-quarter numbers that beat analyst expectations, and it also announced that it would be leaving the Bakken shale after posting very heavy losses there.

Occidental also announced recently a deal with Ecopetrol to invest up to $2 billion over the next decade to increase production at the La Cira-Infantas oil field in Colombia. The new round of investments reportedly will increase production in the region by more than 200 million barrels.

Occidental shareholders receive an outstanding 4.92% dividend. Merrill Lynch has a $95 price target. The consensus target is $79.15. The stock closed on Tuesday at $60.97.

While the beating these stocks have taken this past week is significant, they are probably now in the best range for investors considering buying shares and could be really starting to come into view for acquirers. Remember, shares that are bought during irrational sell-offs are often the ones that bring the biggest upside return, as are companies that are bought during huge industry downturns.

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