The recent bounce for crude oil pricing is a welcome sign for investors that saw huge declines in 2015, which finally bottomed in early 2016. The recent downturn once again had Wall Street bears screaming that prices could once again plunge. The reality is the OPEC production cuts, along with solid demand and the possibility that the price cuts could be extended when OPEC nations vote again on May 25, moved the price back over the $50 level.
Fadel Gheit, the well-respected energy strategist from Oppenheimer, feels that the worst for the sector is largely over, and like many on Wall Street is positive going forward. In a new research report, Gheit and his team posted estimated earnings projections for 2017 and 2018, all of which are much better than was posted last year. We screened the report for the large cap exploration and production companies that look to have among the biggest earnings increase this year and next year.
With every sub-sector of energy down this year, versus a 5% gain in the S&P 500, the sector is clearly one of the best places for growth investors for the next 12 to 24 months.
This stock has been the center of takeover chatter for years, and it could be an outstanding stock for aggressive accounts to consider now. Apache Corp. (NYSE: APA) an independent energy company that explores, develops and produces crude oil, natural gas and natural gas liquids. It operates onshore and offshore assets primarily in the Permian Basin, the Anadarko basin in western Oklahoma, the Texas Panhandle, Gulf Coast areas of the United States, as well as in western Canada.
Apache lost money big-time in both 2015 and 2016. However, the Oppenheimer team like the company’s earnings growth potential for this year and 2018. They estimate 2017 earnings of $1.16 per share and huge growth in 2018 to $2.04 per share. Those numbers compare with a loss of $1.13 per share last year. Oppenheimer feels the company will have a solid quarter, even if the stock has been bludgeoned and is testing lows again printed last summer.
The Wall Street consensus price target for the shares is $61.09. The stock closed Wednesday at $49.19 per share.
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.
Concho made money last year, posting earnings of $0.81 per share. The Oppenheimer team estimates earnings at $1.31 per share for this year and a whopping $2.06 for 2018.
The Wall Street consensus price objective is $164.82, and the shares closed Wednesday at $125.72 apiece.