While most of Wall Street tends to agree that a full oil recovery could take years, many do agree that things should start to improve by next year and will be in far better shape by 2017. In a new report, Stifel takes a stand and advises investors to not wait for a perceived bottom in oil to start buying the top stocks in the sector.
Stifel makes the case that with non-OPEC production declining the most in 24 years, and demand expected to stay on the five-year average, the impetus is there for an oil price recovery. While they expect oil prices to stay range bound between $45 and $55 for up to 18 months, it is pointed out that large-cap exploration and production stocks tend to recover before oil prices do. In addition, the oil rig count is now down nearly as much as it was during the financial crisis.
The bottom line? The Stifel analysts feel that patient investors with a longer term view need to be buying stock now and not waiting for a perceived firm bottom to be in. It makes good sense, and prices may not get much better than they are now.
This is a leading energy company that shows up well on the Jefferies screens. EOG Resources Inc. (NYSE: EOG) is the top producer in the Eagle Ford Shale and it has solid positions in both the Bakken and Permian Basin, making it a perfect fit for an integrated looking to expand in those areas should a purchase or merger make sense. EOG has come up in takeover chatter this year.
This is also a stock that hedge fund guru Kyle Bass owns. He is known for having an extremely keen eye when it comes to balance sheets, so it’s no surprise that this stock resides in the Hayman Capital portfolio.
As of the end of last year, EOG reported total estimated net proved reserves of 2,497 million barrels (MMBbl) of oil equivalent, including 1,140 MMBbl crude oil and condensate reserves, 467 MMBbl natural gas liquid reserves and 5,343 billion cubic feet of natural gas reserves.
EOG investors are paid a small 0.92% dividend. The Stifel price target for the stock is $90, and the Thomson/First Call consensus price target is $95.34. Shares closed on Friday at $72.79.