Most investors who own energy stocks are well aware of the Permian Basin. It reaches from just south of Lubbock, Texas, to just south of Midland and Odessa, extending westward into the southeastern part of New Mexico. Several component basins comprise the greater Permian Basin, and of these, Midland Basin is the largest, Delaware Basin is the second largest and Marfa Basin is the smallest.

New data shows that drilling rig growth in the United States is up a stunning 125% since the trough was put in, with 449 rigs being added back to production. A stunning 43% of those rigs are in the Permian Basin and it continues to be the growth driver for U.S. energy production.

Stifel is one of the Wall Street firms that is extremely bullish on the region, and it has five top stock picks that make good sense for investors looking for value now, especially with oil prices lingering under the important psychological $50 per barrel level.

Concho Resources

Besides being one of the top energy plays in the Permian Basin, this is also a Wall Street favorite. Concho Resources Inc. (NYSE: CXO) is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties. Its principal operating areas are located in the Permian Basin of southeast New Mexico and West Texas, where it owns 600,000 net acres. The company has 624 million barrels of oil equivalent of proven reserves, of which 57% is classified proved developed and 59% is oil.

The company is targeting to deliver 20% oil production growth this year, while investing within its cash flow, a move that many on Wall Street see as very positive. By carefully managing growth and spending, the company looks to be in position to restart the double-digit production growth next year, while many peers are struggling to generate enough excess cash flow to boost output.

Top Wall Street analysts feel that the company’s debt load is below average, as is the firm’s commodity price sensitivity, both of which are big positives for investors.

The Stifel price target for the stock is $206, and the Wall Street consensus target is lower at $164.82. The stock closed most recently at $128.88 a share.

Diamondback Energy

This is another favorite of Wall Street analysts and another top Permian Basin play. Diamondback Energy Inc. (NASDAQ: FANG) is an independent oil and natural gas company headquartered in Midland, Texas, and focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin. Diamondback’s activities are primarily focused on the horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork and Cline formations.

Wall Street analysts have noted in the past the company’s top-tier asset base, solid accretive additions and financial discipline, which they think allows for not only continued solid cash flow, but could put the company in play as a takeover target. Diamondback continues to drill some of the most economical wells in the United States as efficiencies improve, costs decrease and activity remains in the better regions.

Earnings estimates for the company continue to go higher, and many on Wall Street feel Diamondback can deliver total 2017 numbers that come in above current consensus estimates.

Stifel has a $123 price target on the stock. The consensus target is $130.72, and shares last closed at $100.34.

Energen

This lesser known company is a solid choice for those looking for Permian Basin exposure at a reasonable price. Energen Corp. (NYSE: EGN) is an oil and gas exploration and production company with headquarters in Birmingham, Alabama. The company has approximately 775 million barrels of oil-equivalent proved, probable and possible reserves and another 2.5 billion barrels of oil-equivalent contingent resources. These all-domestic reserves and resources are located primarily in the Permian Basin.

Top analyst feel that Energen is a rare breed, with strong debt-adjusted growth, inventory depth from a quality and blocky Permian footprint, balance sheet and value. Recent Generation 3 completions show promise for a step-change in well productivity, and none of that appears baked into guidance or street estimates.

The $80 Stifel price target is well above the posted consensus target of $70.93. The shares closed Wednesday at $52.02.

Pioneer Natural Resources

Many Wall Street analysts love this stock for its Permian exposure and as a pure crude oil play. Pioneer Natural Resources Co. (NYSE: PXD) operates a modern fleet of more than 24 top-performing drilling rigs throughout onshore oil and gas producing regions of the United States and Colombia. Pioneer production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units and a range of advanced coiled tubing units.

Pioneer is not only a huge player in the Permian basin but also 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. With a stellar balance sheet, the company is poised to remain the number one independent player in the Permian, as it is expecting to deliver solid production growth again in 2017.

Pioneer investors are paid a tiny 0.04% dividend. The Stifel price target is a mammoth $267 and the consensus figure is set at $232.67. The stock closed trading on Wednesday at $170.77.

WPX Energy

This is another smaller cap company with solid upside potential. WPX Energy Inc. (NYSE: WPX) is an independent oil and natural gas company that engages in the exploitation and development of unconventional properties in the United States. Its principal areas of operation include the Permian Basin, 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 valuation primarily due to its relatively high financial leverage.

The Stifel price objective is $21. The consensus target price is $18.48, and the stock closed most recently at $11.72.

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These companies are trading well below their 52-week highs, and with all the potential catalysts in front of them they make solid buys now. Investors may want to buy partial positions and see how May trading goes, as it often is a volatile month.

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