Smaller Energy Stocks Are the Cheapest: 4 to Buy Now

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Parsley Energy

This is smaller capitalization stock for aggressive investors to consider. Parsley Energy Inc. (NYSE: PE) is an independent oil and natural gas company that engages in the acquisition, development, production, exploration and sale of crude oil and natural gas properties in the Permian Basin located in West Texas and Southeastern New Mexico.

As of December 31, 2015, its acreage position consisted of 110,967 net acres, including 84,441 net acres in the Midland Basin and 26,526 net acres in the Delaware Basin, as well as estimated proved oil and natural gas reserves were 123.8 million barrels of oil equivalent.

The company posted solid first-quarter results that beat expectations. In addition Parsley Energy’s wells in the Southern Delaware are tracking above expectations, and results from Midland are also looking very impressive.

The RBC price target for the stock is posted at $28, and the consensus is set at $29.89. Shares closed Friday at $26.53.

Rice Energy

This company recently has started to catch some upgrades around Wall Street. Rice Energy Inc. (NASDAQ: RICE) an independent natural gas and oil company, engaged in the acquisition, exploration and development of natural gas, oil and natural gas liquid (NGL) properties in the Appalachian Basin. The company operates through two segments, Exploration and Production, and Midstream.

As of December 31, 2014, it held approximately 86,000 net acres in the southwestern core of the Marcellus Shale, Pennsylvania, and approximately 55,000 net acres in the southeastern core of the Utica Shale located in Belmont County, Ohio.

Some on Wall Street see the company as a solid takeover candidate and see the potential for 20% or more growth over the next few years. Analysts have also cited the fact that the midstream asset portfolio provides balance sheet flexibility, and they think that a capital outspend will be required through 2017 to achieve 20% growth.

RBC has a $19 price target for the stock, and the consensus price objective is set at $22.39. Shares closed Friday at $20.58.

RSP Permian

This company was one of the production growth leaders in the last half of 2015 and into 2016. RSP Permian Inc. (NYSE: RSPP) is an independent oil and natural gas company focused on the acquisition, exploration, development and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin of West Texas. The vast majority of the company’s acreage is located on large, contiguous acreage blocks in the core of the Midland Basin, a sub-basin of the Permian Basin.

The company has caught a string of upgrades from top Wall Street companies during the spring, and many have pointed to the possibility that the company may very well also be a potential takeover candidate.

The RBC price target is set at $36, and the consensus figure is $37.18. The stock closed most recently at $33.74 per share.

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Given the potential for market volatility this summer, and the fact that the spot price and stocks have run big, it may be wise for investors to initiate smaller partial positions now and look for a pullback to be more aggressive in adding shares.