It has been no secret that 2015 was the year that delivered a crushing blow to the oil and gas exploration and production companies. In fact, anything tied to energy seems to have suffered. But what if things have hit rock bottom? Or what if 2016 could be a much better year for the energy patch?
Canaccord Genuity is not calling an exact bottom in the energy patch, but its analyst Stephen Berman has listed several exploration and production companies that could be candidates for a serious bounce back in their shares. The tax-loss selling and window dressing at year’s end have by and large come to an end, and Canaccord Genuity is seeing a potential January Effect for these companies.
Berman has highlighted a handful of Canaccord Genuity’s Buy-rated names that have been hard hit but that could still rebound in the near term. All are said to have potential near-term catalysts or underappreciated financial positions. They come with detailed value analysis on each company’s financial position. Berman said:
Buy them when there is blood in the streets, which we believe there is, and while there is no guarantee of similar returns to what came out of the 2008/2009 recovery, where many SMID-cap E&P names doubled, tripled or more from their depressed market prices, solid returns could await patient investors.
Abraxas Petroleum Corp. (NASDAQ: AXAS) was chosen for its strong asset base after its bank group reaffirmed its borrowing base during the third quarter at $165 million. Abraxas is said to be in full hunker-down mode with balance sheet preservation a top priority. Berman actually is calling for about $20 million in positive cash generation through the end of 2017, and he is comfortable with the company’s liquidity situation. An accretive acquisition that adds to the company’s inventory in one or more of its key areas of operation could act as a positive catalyst, in Berman’s view.
Abraxas’s price target at Canaccord Genuity is $3.00, above the consensus analyst price target of $2.36, and versus a 52-week trading range of $0.84 to $3.98. Abraxas closed at $1.20 on Monday.
This company was last seen to still have some $349 million left on its $375 million in its borrowing base, and its cash was $112.8 million. Bill Barrett Corp. (NYSE: BBG) also has closed on the sale of non-core properties in the Uinta and DJ Basins for proceeds of $56 million. The company continues to opportunistically seek to divest additional non-core properties and is now marketing its remaining Uinta Basin assets with interest from multiple parties.
Bill Barrett’s price target was $8.50 in Berman’s call. That is more than 100% higher than a recent $4.00 share price. Its consensus price target is $7.08, and it has a 52-week range of $2.75 to $13.36.