Many on Wall street are slowly but surely getting on the energy bandwagon, and with good reason. Oil has rallied sharply off the lows posted earlier in the year, and production has dropped dramatically as many drilling rigs have been idled. While things are finally looking up, new supply from Iran is coming online, and OPEC is notorious for pumping more than they say they will.

In a new research report from UBS, the analysts are cautious to recommend stocks that are trading in line with their historical multiples, and tend to avoid, and even have Sell ratings on, some that are trading above. The firm has only four stocks in its U.S. large cap global exploration and production research universe that are rated Buy.

Anadarko Petroleum

This top stock is still down a stunning 52% 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; the deepwater Gulf of Mexico; and in Mozambique, Algeria, Ghana, Brazil, Colombia, Côte d’Ivoire, Kenya, Liberia, New Zealand and other countries. As of December 31, 2014, it had approximately 2.9 billion barrels of oil equivalent of proved reserves.

Anadarko investors are paid a miniscule 0.38% dividend. The UBS price target for the stock is $60, and the Thomson/First Call consensus price objective is $58.43. Shares closed last Friday at $52.22, up over 5% on the day.

Hess

This top mid/large cap stock pick is down a stunning 38% since highs printed in 2014. Hess Corp. (NYSE: HES) is an exploration and production company that develops, produces, purchases, transports and sells crude oil, NGLs and natural gas. The company primarily operates in the United States, Denmark, Equatorial Guinea, the Joint Development Area of Malaysia/Thailand, Malaysia and Norway.

Hess is continuing a transition from an integrated oil and gas company to a predominantly exploration and production entity. The company is shifting its growth approach from high-impact exploration to a smaller, more focused exploration portfolio. Hess released a much lower capital expenditure budget for 2016, which highlights the company’s efforts for cost containment. The company said it will cut capital spending on exploration and production this year by 40% from 2015 to $2.4 billion on low oil prices.

Hess investors are paid a 1.58% dividend. UBS has a $60 price objective, and the consensus target is $60.48. The stock closed Friday above both levels at $63.38, also up over 5% on the day.
Marathon Oil

This company is a leading integrated oil and gas firm with extensive upstream operations. Marathon Oil Corp. (NYSE: MRO) operates through three segments. The North America Exploration and Production segment develops, explores for, produces and markets crude oil and condensate, NGLs and natural gas in North America.

The International Exploration and Production segment explores for, produces and markets crude oil and condensate, NGLs and natural gas in Equatorial Guinea, Gabon, the Kurdistan Region of Iraq, Libya and the United Kingdom, as well as produces and markets products manufactured from natural gas, such as liquefied natural gas and methanol in Equatorial Guinea.

The Oil Sands Mining segment mines, extracts and transports bitumen from oil sands deposits in Alberta and Canada, and it upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil.

Top analysts cite the company’s higher multiple businesses, and the upstream cash margins have room to move up as shale production increases and oil prices recover. They also point out the stock trades at a very attractive discount to net asset value relative to industry peers.

Marathon investors are paid a 1.4% dividend. The UBS target price for the stock is $16. The consensus target is posted at $14.58. The stock closed Friday at $14.34.

Noble Energy

This top stock was hit recently after Israel’s high court blocked the government’s proposal to regulate the natural gas industry in a decision that could stall the development of a major oil field by the company. Noble Energy Inc. (NYSE: NBL) is independent energy company that engages in the acquisition, exploration and production of crude oil, natural gas and NGLs worldwide.

Its principal projects are located in DJ Basin, Marcellus Shale, Eagle Ford Shale and Permian Basin of the United States, as well as in deepwater Gulf of Mexico, offshore Eastern Mediterranean and offshore West Africa. As of December 31, 2015, the company had approximately 1,421 million barrels oil equivalent of total proved reserves.

Noble announced a large debt tender back in January that dramatically increased the financial flexibility at the company. Using a new three-year term loan agreement with seven lending institutions for a principal amount of up to $1.4 billion, the company announced tender offers for three separate debt issuance issues. This should provide annual interest savings of up to $50 million and substantially enhance deleveraging flexibility.

Noble investors are paid a 1.11% dividend. The $38 UBS price target is a little below the consensus figure of $38.72 per share. Nobel closed trading Friday at $36.04 per share.

The UBS target and stock prices are conservative, as they watch the overall sector heal. The top stocks to Buy may have much better upside that the targets indicate, especially if oil does continue the solid rally.

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