Energy Business

Despite Caution, Deutsche Bank Raises Prices on Some Top Energy Stocks

It never fails. Just about the time that some on Wall Street started to call for $20 oil, it reversed and traded up almost 50%. While some of the move was short covering and macro driven, some of it is because of declining production and demand.

In a new report, Deutsche Bank analysts say that while there are a few red flags that suggest caution, $40 a barrel oil never looked so good and the near-term momentum looks to be positive.

The Deutsche Bank team did some work on the firm’s coverage universe, and many of the top stocks that the analysts have rated Buy got a boost in the price target. We screened those stocks and found four that make good sense for aggressive accounts looking to add energy.

Concho Resources

This is one of the top energy plays in the Permian Basin in West Texas, and it is 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.

The company recently announced three separate transactions that enhance its position in the southern Delaware Basin, high grade the company’s portfolio and reduce net debt:

  1. It agreed to acquire approximately 12,000 net acres complementary to its core North Harpoon prospect in Ward and Reeves Counties, Texas, from a private operator for total consideration of approximately $360 million, through a combination of common stock, cash and drilling carry.
  2. Concho Resources completed an acreage exchange with Clayton Williams Energy, consolidating 21,000 net non-operated acres into a concentrated, operated position adjacent to the Concho’s Big Chief prospect in Reeves County.
  3. The company also agreed to sell 14,000 net acres in Loving County, Texas, for cash proceeds of $290 million.

The aggregate impact of these transactions is neutral to Concho’s 2016 capital and production outlook.

Deutsche Bank raised its price target for the stock to $125 from $115. The Thomson/First Call consensus target price is $112.91. The stock closed Wednesday at $101.54 per share.