Energy Business

4 Top Energy Sector Stocks to Buy for April

Jefferies is bullish on Encana, and earlier this year elevated the stock to its Franchise Picks portfolio, which represents the highest conviction stocks at the firm. The company reported better-than-expected fourth-quarter 2015 earnings on improved crude volumes. The bottom line was also better than first quarter 2015. The stock is a favorite at Goldman Sachs too, especially if oil stays in the mid-$30s range.

The $8 Jefferies price target is higher than the consensus target of $7.20. The shares closed Friday at $5.99.

Gulfport Energy

This is one of the favorites around Wall Street among the smaller more nimble companies, and it is also a member of the Jefferies Franchise Picks portfolio. Gulfport Energy Corp. (NASDAQ: GPOR) is an independent oil and natural gas exploration and production company with its principal producing properties located in the Utica Shale of Eastern Ohio and along the Louisiana Gulf Coast. In addition, Gulfport holds a sizable acreage position in the Alberta Oil Sands in Canada through its 24.9% interest in Grizzly Oil Sands.

Gulfport is a favorite of hedge fund managers. According to Insider Monkey, 36 hedge funds owned positions in the stock late last year. The shares hit some weakness on gas prices and a lower growth outlook, a move lower many believe is overdone, and recent stock movement seems to have confirmed. With a multiple in line with peers and an expected ramp-up in production this year, the stock may be a great value at current levels, despite last week’s big rally.

Jefferies has a $33 price target, but the consensus target is $34.18. The stock closed Friday at $28.55.

Noble Energy

This top stock was hit hard recently when Israel’s high court blocked the government’s proposal to regulate the natural gas industry in a decision that could stall the development of a major oil field by the company. Noble Energy Inc. (NYSE: NBL) is independent energy company that engages in the acquisition, exploration and production of crude oil, natural gas, and NGLs worldwide. Its principal projects are located in DJ Basin, Marcellus Shale, Eagle Ford Shale and Permian Basin in the United States; deepwater Gulf of Mexico; offshore Eastern Mediterranean; and offshore West Africa. As of December 31, 2015, the company had approximately 1,421 million barrels oil equivalent of total proved reserves.

Noble announced a large debt tender back in January that dramatically increased the financial flexibility at the company. Using a new three-year term loan agreement with seven lending institutions for a principal amount of up to $1.4 billion, the company announced tender offers for three separate debt issuance issues. This should provide annual interest savings of up to $50 million and substantially enhance deleveraging flexibility.

Jefferies analysts met with the company’s management recently, and they feel that there is significant “trapped” value in the Israeli offshore gas asset and the ability to balance spending within internally generated cash flow. The company believes it can sanction Leviathan perhaps by year end, which could provide monster upside potential.

Noble investors receive a 1.26% dividend. The $38 Jefferies price target is essentially in line with the consensus figure of $38.25. Nobel closed trading Friday at $31.76.

History shows that April and energy make good partners, and given some of the issues that are affecting the sector, the rally we saw on Friday could continue as we head further into the month.

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