Energy Business

13 Top Oil & Gas Stock Picks for 2018 as Oil Challenges $60

Chevron Corp. (NYSE: CVX) has underperformed the market in 2017, but Cowen came out swinging right before Christmas by raising the firm’s prior $122 official price target all the way up to $160. This is almost an unheard of price hike to see an analyst magically come up with another one-third of higher valuation for a stock — and a Dow Jones Industrial Average stock to boot.

Cowen sees several benefits for Chevron now. Its lower earnings case should have diminished importance next year due to “moving parts around tax reform” and higher depreciation expense required to start up its liquefied natural gas (LNG) assets in Australia. Cowen also sees 2018 free cash flow at near record levels of $14.5 billion, versus about $6.4 billion in 2017. And the firm talked up its Permian metrics as accelerating.

Chevron shares were most recently trading around $126, in a 52-week range of $102.55 to $126.14. This call from Cowen lifted the consensus price target to over $128.50 from about $124.50, and just 90 days earlier the consensus analyst target price was $115.77. Chevron shares were up 7% year to date in 2017.

CNX Resources Corp. (NYSE: CNX), the natural gas play that was under CONSOL (coal), was started as Outperform and assigned a $22 price target at Robert W. Baird on December 19. The shares were up 1.4% at $14.40 after the call, still implying just over 50% upside in the post-spin operation. More recently, the shares were trading at $14.82, and the 52-week trading range was listed as $11.29 to $16.47. Back on December 1, S&P raised its corporate credit rating to BB− from B+ based on exiting the coal overhang.

One issue that may spur more analyst calls into the start of 2018 is that CNX Resources has more recently announced the intention to rebrand Cone Midstream Partners to CNX Midstream Partners. CNX has a consensus analyst target price that is $17.60, but that target has come down $2 in the past 30 to 45 days.

CNX shares were last seen down 2% so far in 2017.

Continental Resources Inc. (NYSE: CLR) was raised to Outperform from Neutral at Macquarie on December 14, and on December 12 Credit Suisse started it with an Outperform rating and assigned a $57 price target. On December 21, Barclays raised its target price to $53 from $46. As of the end of 2016, Continental’s estimated proved reserves were 1.275 billion barrels of oil equivalent (MMBoe) with estimated proved developed reserves of 519 MMBoe. Its market cap is about $20 billion.

Continental Resources is a key player in the “Rockin’ the Bakken” theme. Trading at $53.41 now, the stock has a consensus target price of $51.73, and that target is up $7 in roughly the past 90 days. The 52-week range for this energy giant is $29.08 to $53.57, and its shares have risen about 10% just since December 20.

Continental Resources shares were last seen 3.6% so far in 2017.

Energy Transfer Partners L.P. (NYSE: ETP) merged with Sunoco Logistics Partners last year and the entity engages in the natural gas midstream and intrastate transportation and storage businesses in the United States. This more than $20 billion master limited partnership (MLP) owns and operates 7,500 miles of natural gas transportation pipelines and three natural gas storage facilities in Texas, and its Interstate Transportation and Storage segment provides natural gas transportation and storage services with approximately 12,300 miles of interstate natural gas pipelines. It also has interests in various natural gas pipelines.

Energy Transfer Partners was featured around Christmas as one of five top MLP picks by RBC, with a $22 price target that is lower than consensus. There is also a 12% distribution yield-equivalent to consider here. The consensus target price was last seen at $24.70, but the consensus target was $26.80 just 90 days earlier. The unit performance showed a 25% drop so far in 2017. RBC recently noted:

The company has under-performed on growth project challenges and equity overhang. We believe these headwinds have mostly subsided and Energy Transfer is on path for cash flow growth as growth projects including DAPL, Rover, ME2/2X and Revolution come online and/or continue to ramp. As cash flow increases, we expect natural de-leveraging and a path to simplification.

Fairmount Santrol Holdings Inc. (NYSE: FMSA) was raised to Buy from Neutral at Guggenheim with a $7.30 price target on December 18. Its shares were at $5.18 ahead of the call, and they more recently traded at $5.36. This fracking-sand player has a volatile 52-week range of $2.46 to $13.12. Guggenheim’s target is handily above the consensus target price of almost $6 but is also less than the current street-high target of $8.

Fairmont Santrol has lost half of its value in 2017.

Halliburton Co. (NYSE: HAL) may still be down over 20% from the highs of last January but it was among five top oil services picks at Deutsche Bank right before the Christmas break. Halliburton is of course one of the world’s largest providers of products and services to the energy industry, and it operates almost anywhere it is called to go. Analysts feel that Halliburton will be a huge benefactor as the fracking market has tightened significantly and prices are now higher. The company posted solid third-quarter results that topped analysts’ estimates, driven by better pricing and increased activity in North America.