8 Oil and Gas Stocks That Analysts Want You to Buy Now

September 24, 2016 by Jon C. Ogg

The week of September 23 was somewhat of a strong one for the oil and gas industries. Sadly, that strength wasn’t seen late on Friday. West Texas Intermediate (WTI) crude is again trading close to $45 per barrel. This is a level at which many investors want to know which oil and gas stocks they should be looking to buy for long-term opportunities. One trend that has been proven over and over is that investors want to buy their favorite stocks either on pullbacks or when they can be opportunistic.

24/7 Wall St. tracks dozens of analyst upgrades and downgrades each day of the week. Many of these calls are in companies that are well-known in the oil and gas industries. The week of September 23 brought numerous analyst upgrades and downgrades in oil and gas stocks.

Some analysts believe many of the energy stocks continue to be very smart buys. Just do not ignore the notion that some of these “big buy ratings” also have analysts elsewhere telling clients to sell or hold.

When oil is back in the mid-$40s, some companies can take the risk-on attitude. Others have to sit idle. The reality is that much of the oil and gas industry remains in a zombie mode right now.

Buying oil and gas stocks down in the $30s for oil was a serious win. Buying in the mid-$40s comes with more price stability but also often comes with less implied analyst upside. It is also important to consider that any and all of these analyst price targets and upside projections will look rather silly if oil drops back down into the $30s again.

Here are the top energy stocks with major analyst calls from the week of September 19 to September 23, 2016.

Enterprise Products Partners L.P. (NYSE: EPD) was raised to Outperform from Neutral at Credit Suisse on September 19. It had seen serious weakness prior to this over concerns it may try to get involved in a large merger as the acquirer, but Credit Suisse’s John Edwards maintained his $34 price target. While the full details of this upgrade show what matters most, investors should consider that this is 5% higher than the consensus analyst price target. The company’s units traded at $27.28 on Friday’s close, with a 52-week range of $19.00 to $30.11. Its distribution has a yield equivalent of well over 5% as well.

Western Refining Inc. (NYSE: WNR) was raised to Outperform from Neutral at Credit Suisse on September 19. The official price target was raised to $31 from $27, but what really stood out was the note that Western Refining could rise to $40 in 2020 in a more detailed outlook. Shares closed trading at $27.52 on Friday, in a 52-week range of $18.14 to $47.55. The consensus target price is actually lower at $25.82.

Ensco PLC (NYSE: ESV) was raised to Buy from Neutral with a $10.50 price at Goldman Sachs on September 21. This was a whopping 58% higher than the prior $6.64 closing price, but the shares popped over 6% initially after the news to $7.05. Goldman Sachs noted that Ensco has been the worst-performing offshore driller so far in 2016 after dividend cuts and being removed from the S&P 500. The firm sees Ensco now trading at two to three points under peer valuations while having the best leverage to jack-ups and with exposure to the Middle East and Asia-Pacific. Its recent securities offering gives it a better balance sheet and liquidity position.

Cabot Oil & Gas (NYSE: COG) was raised to Strong Buy from Market Perform at Raymond James on September 23. The stock was assigned a $30 price target, versus a $25.57 prior closing price, implying upside of almost 20% if the call proves to be right. The consensus price target is $29.10, and the 52-week trading range is $14.88 to $26.74.

Diamond Offshore Drilling Inc. (NYSE: DO) was raised to Buy from Hold with a $19 price target at Evercore ISI on September 20. This was versus a prior closing price of $14.94. We would point out that on September 21 a downgrade was issued by Goldman Sachs, to Sell from Neutral. Also, Goldman Sachs cut its target price to $10 from $18.50. One buy, one sell — it’s a Diamond Offshore ballgame now!

Energen Corp. (NYSE: EGN) was started with a Buy rating and was assigned a $66 price target at Canaccord Genuity on September 19. This was versus a $52.83 prior closing price. The report showed why Credit Suisse sees Western Refining generating 60% upside to 2020 in gains and dividends.

Range Resources Corp. (NYSE: RRC) was started with an Outperform rating and assigned a $49 price target (versus a $36.58 close) at Credit Suisse. It has a 52-week range of $19.21 to $46.96 and a consensus price target of $48.76.

Matador Resources Co. (NYSE: MTDR) was raised to Accumulate from Hold and was given a $25 price target at KLR Group on September 21. The prior close was $20.49. Matador shares closed at $21.20 on Friday, despite a 5% drop. Matador Resources has a 52-week range of $11.13 to $28.25. This exploration and production company is worth just $2 billion. It operates in Wolfcamp and Bone Spring in the Delaware Basin in Southeast New Mexico and West Texas, and it has operations in the Eagle Ford shale in South Texas and the Haynesville shale and Cotton Valley in Northwest Louisiana and East Texas.

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Elsewhere in the energy patch during the week of September 23, 2016: