While the market continues to tread water near all-time highs, many investors are trying to find sectors that continue to offer upside potential for the second half of 2019, which begins on Monday. With the potential for some headway in the trade talks, and a hot summer with a busy driving season, energy is offering sizable value as we begin the third quarter.
Given the potential for more mergers and acquisitions coming, especially for Permian-based companies, we screened the Stifel energy research universe for top mid-cap companies rated Buy that also may be in play as M&A targets, and all have at least 100% or more upside to the Stifel price targets.
Carrizo Oil & Gas
This is a top energy stock for value buyers to consider. Carrizo Oil & Gas Inc. (NASDAQ: CRZO) is a Houston-based energy company actively engaged in the exploration, development and production of oil and gas from resource plays located in the United States. Carrizo’s current operations are principally focused in proven, producing oil and gas plays, primarily in the Eagle Ford Shale, the Utica Shale in Ohio, the Niobrara Formation in Colorado and the Marcellus Shale in Pennsylvania.
Many on Wall Street see the company as one of the best positioned due to the low breakeven costs, solid operating scale and a very good balance sheet with ample liquidity. Top analysts also think the company may take advantage of difficult situations for others and make acquisitions, especially in the Eagle Ford.
The Stifel price target on the stock is a stunning $41. The Wall Street consensus target is much lower at $18.58, and the stock closed Friday’s trading at $10.02 per share.
[nativounit]
Parsley Energy
This is a smaller capitalization stock for aggressive investors to consider. Parsley Energy Inc. (NYSE: PE) is an oil and gas producer with 227,000 net acres in the Permian Basin. The majority of acreage sits on the Midland side of the basin, but the company also holds a small acreage position in the Delaware Basin. Through strategic acquisitions and acreage swaps, it has grown its acreage position since its initial public offering and has over 7,900 horizontal locations across multiple prospective zones.
The company is a catalyst rich Permian Basin pure play. Parsley Energy has some of the strongest wells in the basin, generating returns that are among the best in the industry. It is also rapidly de-risking its drilling inventory and is well positioned to continue to beat its strong growth projections.
Stifel has a price target of $38 on the shares, while the posted consensus price target is $27.07. The stock closed most recently at $19.01 a share.
[recirclink id=557202]
QEP Resources
This stock has had a nice run off the bottom but still holds huge upside potential. QEP Resources Inc. (NYSE: QEP) is a holding company engaged in the exploration and production of oil and natural gas properties. It focuses on the northern region (primarily in North Dakota, Wyoming and Utah) and the southern region (primarily in Texas and Louisiana).
Aethon Energy Management recently announced the completion of its acquisition of natural gas assets supporting up to 600 million cubic feet equivalent per day of production from wholly owned subsidiaries of QEP Resources. The assets are located in the Haynesville basin in northwest Louisiana.
The QEP assets comprise approximately 49,700 net acres and 607 operated wells of natural gas producing properties and undeveloped acreage in the Haynesville. The collective reserve base of QEP’s assets combines low risk, long life and highly predictable production with attractive development opportunities.
The massive $17 Stifel price objective compares with a $9.50 consensus target price. The shares ended last week at $7.23 apiece.
Whiting Petroleum
This stock was massacred in the spring selling and offers serious upside potential. Whiting Petroleum Corp. (NYSE: WLL) is an independent oil and gas company that explores for, develops, acquires and produces crude oil, natural gas and natural gas liquids primarily in the Rocky Mountain and Permian Basin regions of the United States.
The company’s largest projects are in the Bakken and Three Forks plays in North Dakota, the Niobrara play in northeast Colorado and its Enhanced Oil Recovery field in Texas.
While Whiting released weak first-quarter results in May, the company’s guidance for 2019 remained pretty much unchanged, and it posted solid well results in the Bakken. The company’s impressive completion optimization continues along with solid cost controls in place. Whiting offers investors a steady oil-levered growth profile and evolving free-cash-flow prospects.
Stifel has set its price target at $53, well above the consensus target last seen at $32.95. The shares closed trading most recently at $18.68.
[recirclink id=557264]
WPX Energy
This is another smaller cap company with solid upside potential and also another top Permian Basin play. WPX Energy Inc. (NYSE: WPX) is an independent oil and natural gas exploration and production 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 Williston valuations primarily due to its relatively high financial leverage.
Stifel analysts have their price target set at $28. The posted consensus price objective is $18.81, and the stock was changing hands most recently at $11.51 a share.
[wallst_email_signup]
These five top picks from the Stifel team all were pounded during the spring and now offer investors massive upside potential to the assigned price targets. They also range from very aggressive to more conservative, so investors have a solid variety of stocks to match to their risk tolerance. In addition, all could be considered potential targets, especially those with bigger Permian Basin footprints.
Its location on the Permian Basin makes Midland, Texas, one of the richest towns in America.
Top Gaining Stocks
Top Losing Stocks