One thing that has gotten our attention here at 24/7 Wall St. is something that has rubbed top Wall Street analysts the wrong way. Many investors have chased lower quality energy stocks, and they got a nice hand with the short covering rally that started back in January. However, if the oil rally fades, the weaker stocks will be the first ones to get hit.
A new research note from the energy team at Stifel agrees with that theory and cautions investors against chasing many stocks that they have rated Hold and Sell. While they frown on those companies, they are much more positive on the stocks they feel can continue to face low oil price headwinds, and they raise price targets on nine companies rated Buy.
We focus on four that also have a solid Wall Street following as well.
This top stock is still down a stunning 58% since the highs printed in 2014. Anadarko Petroleum Corp. (NYSE: APC) operates through three segments. The Oil and Gas Exploration and Production segment explores for and produces natural gas, oil, condensate and natural gas liquids (NGLs).
The Midstream segment provides gathering, processing, treating, and transportation services to Anadarko and third-party oil, natural gas and NGLs producers, as well as owns and operates gathering, processing, treating and transportation systems in the United States. The Marketing segment markets oil, natural gas and NGLs in the United States; oil and NGLs internationally; and anticipated liquefied natural gas production from Mozambique.
The company’s asset portfolio includes U.S. onshore resource plays in the Rocky Mountains, the southern United States, the Appalachian basin and Alaska, and the deepwater Gulf of Mexico, as well as international plays in Algeria, Ghana, Brazil, Colombia, Kenya, Liberia, New Zealand and elsewhere. As of December 31, 2014, it had approximately 2.9 billion barrels of oil equivalent of proved reserves.
Back in December, the company once again posted earnings that beat estimates and raised the guidance going forward. In addition to its strong performance, Anadarko is lowering costs and keeping the balance sheet as clean as possible.
Anadarko investors receive a 0.43% dividend. The Stifel price target was raised to $54 from $48, and the Thomson/First Call consensus target is $58.10. Shares closed Monday at $45.63.
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:
- 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.
- 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.
- 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.
Stifel lifted its price target to $120 from $109, while the consensus target is $113.26. The stock closed Monday at $101.85.