The mere fact that Organization of the Petroleum Exporting Countries (OPEC) did nothing last Friday to curtail production is exactly the reason that, sooner rather than later, production cuts start coming. The deficits that the Saudis and other countries are facing from the lower oil prices will need to be addressed soon. Add in the fact that the Democrats are looking like they may join the Republicans in the fight to let domestic oil companies export around the world, and pricing should firm at some point in 2016.
In a new research report, Deutsche Bank recaps a recent trip to Denver to meet with companies, and while the current environment is still bleak, the meetings showed the analysts that some producers are in much better shape to get through the current tough times than others, and they could emerge even stronger for the next up-cycle.
In the report, Deutsche Bank had five top pick stocks to Buy.
EQT Corp. (NYSE: EQT) is expected to have a stunning 99% of its production come in as natural gas. This may prove huge for investors if another ruthless summer shows up, which some are now predicting. The company’s 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.
EQT investors are paid a tiny 0.2% dividend. Deutsche Bank has a $86 price target, and the Thomson/First Call consensus target is higher at $90.11. EQT closed Monday at $53.08.
This company has seen some positive earnings revisions recently. Encana Corp. (NYSE: ECA) is a leading North American energy producer that is focused on developing its strong portfolio of resource plays, held directly and indirectly through its subsidiaries, producing natural gas, oil and natural gas liquids (NGLs).
The company recently completed the previously announced sale of its Haynesville natural gas assets, located in northern Louisiana, to GEP Haynesville (GeoSouthern). Total cash consideration to Encana from the transaction was $850 million, a big boost to the balance sheet.
The Deutsche Bank price target is $11, and the consensus is set at $11.25. Shares closed down big Monday at $6.71.