Energy

Stifel Has 5 Energy Stocks Trading Under $10 With Gigantic Upside Potential

Lee Jackson

Published: November 9, 2019 9:00 am

Last Updated: January 30, 2020 1:23 pm

While most of Wall Street focuses on large and mega cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. Often the biggest public companies, especially the technology giants, trade in the low-to-mid hundreds, all the way up to over $1,000 per share. At those steep prices, it’s pretty hard to get any decent share count leverage.

Many investors, especially more aggressive traders, look at lower-priced stocks as a way to not only make some good money but to get a higher share count. That can really help the decision-making process, especially when you are on to a winner, as you can always sell half and keep half.

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Every week, we screen our 24/7 Wall St. research database looking for stocks with Buy equivalent ratings at major firms and priced under the $10 level (last week’s picks included Northern Oil & Gas and Zynga), and this week was no exception. The analysts at Stifel are positive on the energy sector for 2020 and they have five stocks rated Buy that could provide investors with some solid upside potential. While more suited for aggressive accounts, these stocks could prove exciting additions to portfolios looking for solid alpha potential and to take advantage of a potential move higher in the energy sector.

Callon Petroleum

This is a small-cap stock that the Stifel team feels very comfortable about currently. Callon Petroleum Co. (NYSE: CPE) is an independent oil and natural gas company engaged in the exploration, development, acquisition and production of oil and natural gas properties. It focuses on the acquisition and development of unconventional oil and natural gas reserves in the Permian Basin.

Callon Petroleum’s drilling activity focuses on the horizontal development of various prospective intervals in the Midland Basin, including multiple levels of the Wolfcamp formation and the Lower Spraberry shale.

Callon made a huge $570 million acquisition of 29,000 net acres last May, which more than doubled the Delaware Basin footprint. The company is still trying to acquire Carrizo, which it made an all-stock bid for back in the summer.

The Stifel price target for the shares is $8, and the Wall Street consensus target is lower at $7.57. The stock ended trading on Friday at $4.54 a share.

Carrizo Oil & Gas

This top energy stock for value buyers to consider has been absolutely mauled this year. 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.

Last year the shares traded in the mid-$30s and have been absolutely hammered in 2019. Callon Petroleum announced back in the summer it would buy Carrizo Oil & Gas for $1.2 billion in stock, the latest in a string of acquisitions as energy companies scale up to boost cash flow and quell investor criticism over lack of returns. The Paulson hedge fund has voted against the acquisition. If the deal goes through, Carrizo shareholders will receive 2.05 Callon shares for each share held. Shareholders will vote on November 14.

Stifel has a stunning $15 price target on the stock, and the posted consensus target is lower at $12.37. Shares closed at $7.72 on Friday.

This off-the-radar company could have solid upside potential. Centennial Resource Development Inc. (NASDAQ: CDEV) is a pure play Permian oil and gas producer. The company holds 88,000 net acres across the Delaware Basin, with its largest position in Reeves and Pecos, Texas, (76,100 net acres) and recently acquired position in Lea County, New Mexico, (11,900 net acres), Centennial’s legacy position, which was held since the time of its IPO late 2016 and covers 42,5000 net acres in Reeves, Pecos and Ward counties.

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The company’s third-quarter results were solid but essentially in line with expectations. Positive well results, continued efficiency gains and borrowing base reaffirmed, the company does not hedge its production, so if oil spikes higher, this stock could be a huge winner.

The $6 Stifel price objective compares with the $6.62 consensus target. The stock ended the week at $3.56 per share.

HighPoint Resources

Investors looking for a micro-cap energy play will love this company. HighPoint Resources Corp. (NYSE: HPR) is an independent oil and gas company engaged in the exploration, development and production of oil, natural gas and natural gas liquids. The company primarily holds interests in the Denver Julesburg Basin in Colorado’s eastern plains and parts of southeastern Wyoming.

HighPoint maintains a conservative approach to proved reserve bookings and only included approximately 220 gross proved undeveloped (PUD) locations at year-end 2018, of which approximately 60 gross PUD locations represent wells that are in various stages of drilling and completion activity. This amounts to approximately 1.5 years of future development activity at the current planned development pace.

The analysts at Stifel have a massive $7 price target. The consensus target was last seen at $3.54, and shares were trading at $1.32 apiece on Friday’s close.

QEP Resources

This energy stock has had a nice run off the lows 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 announced earlier this year the completion of its acquisition of natural gas assets from wholly owned subsidiaries of QEP Resources. The assets are located in the Haynesville basin in northwest Louisiana.

Shareholders receive a 2.23% dividend. Stifel has a massive $12 price objective. The posted consensus target is $6.47, and the shares closed trading at $3.71.

These five solid energy picks trading under $10 from the Stifel team were all pounded during 2019 and 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 choices to match their risk tolerance. In addition, all could be considered potential buyout targets, especially those with bigger Permian Basin footprints.