It was pretty clear when the Saudi oil facilities were attacked, temporarily knocking out 50% of total production, that the world was in very uncharted territory. Despite extensive radar and missile protection for the Saudi facilities, Yemen Houthis rebels allegedly carried out the massive drone strike. Over the weekend, Al Jazeera reported that the rebels stated that they will stop attacks on the Saudi kingdom, but the genie is clearly out of the bottle.

The key issue is that both the United States and Saudi Arabia have claimed that Iran was ultimately behind the attack, and the growing friction between the three nations has ratcheted up concerns over the potential for a bigger conflict in the Middle East. In a move that was probably timely under the current circumstances, John Bolton was removed as national security adviser earlier this month amid fundamental disputes over how to handle major foreign policy challenges like Iran, North Korea and most recently Afghanistan.

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The question for investors is how to be involved in the energy arena but also stay away from the potential for attack and supply disruptions. The best way is to focus on energy exploration and production companies that have their business located in the United States, away from the Middle East.

We screened the Merrill Lynch energy research universe looking for Buy-rated stocks with production only in the United States. We found four that fit the bill perfectly, and all are huge players in the oil-rich Permian Basin.

Concho Resources

Last year, this company bought RSP Permian for $9.5 billion, and most on Wall Street loved the deal. Concho Resources Inc. (NYSE: CXO) is an independent company engaged in the acquisition, development and exploration of oil and natural gas properties.

It offers investors a unique combination of investment themes, including valuation, rate-of-change and resource expansion themes. The company is the largest acreage holder of the publicly traded Permian large-caps and provides investors peer-leading exposure to three of the most impactful catalysts across the Delaware Basin, including the Wolfcamp XY, Wolfcamp D and Bone Spring Shale.

Concho Resources reports strong earnings but still has a lot of upside to posted Wall Street price targets

The company pays a small 0.68% dividend. The Merrill Lynch price target for the shares is $139, and the Wall Street consensus target price is $116.69. The shares were trading early Monday at $73.00.

Diamondback Energy

This top Permian Basin play for more aggressive accounts could be a takeover target. 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 in West Texas.

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.

Merrill Lynch has a price target on the stock of $165, while the posted consensus target was last seen at $144.47. The shares traded at $97.30 apiece Monday morning.

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 its 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.

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The company is a catalyst rich and is 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 also is rapidly de-risking its drilling inventory and is well-positioned to continue to beat its strong growth projections.

The $27 Merrill Lynch price target compares with the $25.28 consensus target price. The stock was trading at $18.40 per share.

Pioneer Natural Resources

Many Wall Street analysts love this stock for 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 a huge player in the Permian Basin and in 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 its stellar balance sheet, the company looks poised to remain a top player in the Permian because it expects to deliver solid production growth in the rest of 2019 and beyond.

The investors receive a 1.31% dividend. Merrill Lynch has set its price target at $190. The consensus figure is just below that level at $184.58, and the stock was trading at $133.00 on Monday.

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The bottom line for investors is that energy has drastically underperformed in 2019, and with geopolitical turbulence swirling in the Middle East, there could be huge value in owning these companies as they are somewhat protected from the kind of interruptions the Saudis are now facing.

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