With all the talk about the new highs in the stock market, especially in technology, one area that has struggled this year is the energy sector. With oil again falling under the psychological $50 level, some investors are getting nervous. The fact of the matter is nobody wants oil under the $50 level, especially the OPEC nations. For many, oil is the leading and in some cases the only export. So a continuation of the production cuts is a distinct possibility.
One good path for energy investors to follow is sticking with companies reporting good earnings and backing that up with either positive guidance or positive metrics and performance data. In a series of new research reports, Stifel analysts focus on five top stocks to buy that have one or more of those qualities.
Cabot Oil and Gas
With many expecting a very hot summer, this top natural gas play could be a timely pick. Cabot Oil & Gas Corp. (NYSE: COG) produces mostly natural gas in the United States, with operations primarily in Appalachia and an ancillary position Eagle Ford. The company has lined up very high-quality growth assets in the Marcellus Shales and is aggressively moving to develop these fields. Production and reserves are 96% natural gas.
U.S. energy firms are scrambling to finish a slew of pipelines that will unleash rich reserves of shale gas in Pennsylvania, West Virginia and Ohio as the nation prepares to become one of the world’s top natural gas exporters. Cabot figures to be a big player in this evolution and offers solid value and current trading levels.
The analysts note that despite some exploratory concerns, the company boasts one of the best-in-class free-cash-flow generation stories in the sector, and the recent pullback in the shares is offering a very solid entry point.
Cabot shareholders are paid a small 0.33% dividend. The Stifel price target for the stock is $30, and the Wall Street consensus target is $29.23. The stock closed Tuesday at $23.13 a share.
This company also expects to have a large portion of its production come in as natural gas. EQT Corp.’s (NYSE: EQT) superior cost structure and above-average growth may help it exploit stable and rising natural gas prices. With an increasing reserve structure and a projected higher number of Marcellus wells to be drilled in the coming five years, the company exhibits industry-leading organic growth momentum.
With more than 125 years of experience, EQT continues to be a leader in the use of advanced horizontal drilling technology. This technology is designed to minimize the potential impact of drilling-related activities and reduce the overall environmental footprint. That is very shareholder friendly. Plus, the company is a low-cost producer with a very strategic midstream presence.
The company’s midstream holdings are considered among the best in the industry, and with a $1.75 billion stake in Equity Midstream Partner, the company has a combined $10 billion in midstream holdings. The Stifel team cites the ownership of the general partner, pricing and stronger type curves as all positives for owning the shares.
EQT investors are paid a small 0.21% dividend. Stifel has raised its price target is $81, while posted consensus price target is $80.19. The stock closed most recently at $59.06 per share.