Just over a month ago, many of the top oil exploration and production stocks got a big boost as there was talk of a potential production cut to be announced at OPEC’s big meeting on November 30. Since then, the enthusiasm has faded and some of the top stocks in the sector are down 10% to 15% as investors feel that the OPEC members may fail to come up with a production cut or freeze.
While the volatility has been painful, it has put some of the top quality stocks on sale. In a new Deutsche Bank research report, top-notch analyst Josh Silverstein makes the case that the sell-off is providing investors with a buying opportunity in high-quality producers. We screened the Deutsche Bank research universe and found five growth companies rated Buy that look outstanding.
Besides being one of the top energy plays in the Permian Basin, this is also 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. Its principal operating areas are located in the Permian Basin of southeast New Mexico and West Texas. As of December 31, 2015, its total estimated proved reserves were 623.5 million barrel of oil equivalent.
The company is targeting to deliver 20% oil production growth next year, while investing within its cash flow, a move that many on Wall Street see as very positive. By carefully managing growth and spending, the company looks to be in position to restart the double-digit production growth next year, while many peers are struggling to generate enough excess cash flow to boost output.
The Deutsche Bank price target for the stock is $165, and the Wall Street consensus target is $152. Shares closed Tuesday at $128.60.
This company has a very large exposure to crude oil. Continental Resources Inc. (NYSE: CLR) is a top 10 independent oil producer in the United States and is the largest leaseholder and one of the largest producers in the nation’s premier oil field, the Bakken play of North Dakota and Montana. The company also has significant positions in Oklahoma, including its SCOOP Woodford and SCOOP Springer discoveries and the Northwest Cana play.
Continental was one of the companies that Goldman Sachs thought could be able to thrive even with oil at the $35 level. Should it push back toward $50 and higher in 2017, it seems that the upside could be dramatic.
The Deutsche Bank price target is $64, and the consensus target is set at $56.50. Share closed most recently at $49.02.