Jefferies Has 3 Top Oil Stocks to Buy for a Return to $50 Oil

By Lee Jackson Updated Jan 13, 11:28AM EST · Published Mar 28, 10:20AM EDT

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Jefferies Has 3 Top Oil Stocks to Buy for a Return to $50 Oil — © Thinkstock

While the recent surge of oil seems to have run into a wall at $40, one thing seems to be in place. The market lows appear to have been put in with the drop into the mid-$20s and subsequent bounce back, and at least one top firm we cover here at 24/7 Wall St. thinks the low for the cycle is in.

A new Jefferies research note says that for the first time in history global capital expenditures in the energy industry will have fallen for two consecutive years. In addition, a combination of demand growth and non-OPEC production declines could very well set the stage for a $50 price handle by the end of this year.

We screened the Jefferies research universe and found three stocks the analysts are very positive on. All of course would benefit from a move higher to $50, and all are rated Buy.

Anadarko Petroleum

This top stock is still down a stunning 58% since the highs printed in 2014. Anadarko Petroleum Corp. (NYSE: APC) operates through three segments. The Oil and Gas Exploration and Production segment explores for and produces natural gas, oil, condensate and natural gas liquids (NGLs).

The Midstream segment provides gathering, processing, treating, and transportation services to Anadarko and third-party oil, natural gas and NGLs producers, as well as owns and operates gathering, processing, treating and transportation systems in the United States. The Marketing segment markets oil, natural gas and NGLs in the United States; oil and NGLs internationally; and anticipated liquefied natural gas production from Mozambique.

The company’s asset portfolio includes U.S. onshore resource plays in the Rocky Mountains, the southern United States, the Appalachian basin and Alaska, and the deepwater Gulf of Mexico, as well as international plays in Algeria, Ghana, Brazil, Colombia, Kenya, Liberia, New Zealand and elsewhere. As of December 31, 2014, it had approximately 2.9 billion barrels of oil equivalent of proved reserves.

Back in December, the company once again posted earnings that beat estimates and raised the guidance going forward. In addition to its strong performance, Anadarko is lowering costs and keeping the balance sheet as clean as possible.

Anadarko investors receive a 0.43% dividend. The Jefferies price target for the stock is $57, and the Thomson/First Call consensus target is $58.10. Shares closed most recently at $46.27.
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Pioneer Natural Resources

Many Wall Street analysts love this stock for a pure crude oil play, and it recently was upgraded by Deutsche Bank and Citigroup. Pioneer Natural Resources Co. (NYSE: PXD) engages in the exploration and production of oil and gas in the United States. The company produces and sells oil, natural gas and NGLs. It has operations primarily in the Permian Basin, Eagle Ford Shale and West Panhandle field in Texas and in the Raton field in southeastern Colorado.

Pioneer is a huge player in the Permian and the Eagle Ford, and it 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 more while cutting the number of rigs expected to operate. With a stellar balance and the new capital from a secondary offering earlier this year, the company is poised to remain the number one player in the Permian.

Pioneer investors receive a tiny 0.06% dividend. The Jefferies target price is $147, and the consensus figure is set at $165.21. Pioneer closed last week at $139.19.

RSP Permian

This was one of the production growth leaders in the last half of 2015. RSP Permian Inc. (NYSE: RSPP) is an independent oil and natural gas company focused on the acquisition, exploration, development and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin. The vast majority of the company’s acreage is located on large, contiguous acreage blocks in the core of the Midland Basin, a sub-basin of the Permian.

The company recently caught an upgrade from Goldman Sachs, and many of the top analysts on Wall Street that cover the the company feel that there is a real possibility that it could be a takeover target.

The Jefferies price target is set at $33. The consensus figure is at $31.90. The stock closed most recently at $28.57.
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If the Jefferies team is right and oil does move back to the $50 level by the end of the year, all these companies could trade dramatically higher. They all make sense for aggressive growth portfolios looking to add to energy allocations.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.