While the price of oil has taken a quick dive from the January highs when the market sputtered, it has since firmed, with West Texas Intermediate crude back over the psychologically important $60 a barrel level. This is a huge positive for domestic energy exploration and production companies, as many have worked their breakeven levels down much lower than in years past. It also bodes well for the rest of 2018 if those prices can hold.
A new research report from the analysts at Baird features a very in-depth look at well performance, and one of the areas that continues to deliver is the Delaware Basin. It is the second largest component basin in the Permian Basin, which is located in West Texas and New Mexico.
In the report, the Baird team focuses on five companies that it rates at Overweight, and all of them have outstanding well production coming out of the Delaware Basin. Some of the five also are seeing big improvement in production when compared with 2016 and 2017.
This stock is a top play for investors looking to the Permian Basin. Cimarex Energy Co. (NYSE: XEC) is an independent exploration and production company. Its primary activities are in the Mid-Continent and Permian Basin areas of the United States.
The company is focused on increasing shareholder value through strategies linked to generating attractive economic returns on capital employed and profitable growth in per-share reserves, production and cash flow. It intends to profitably grow reserves and production through a balanced mix of exploration, exploitation and acquisitions.
Cimarex has a diversified base of high-quality production and attractive drilling opportunities. It should be noted that hedge funds have initiated sizable new positions in the company over the past year, and like its brethren in the Permian, many consider the company a very solid takeover target.
Investors in Cimarex are paid just a 0.34% dividend. The Baird price target for the stock is whopping $136. The Wall Street consensus target was last seen at $142.73. The stock closed Wednesday’s trading at $95.13 per share.
This leading energy company shows up well on many Wall Street screens. EOG Resources Inc. (NYSE: EOG) is one of the largest independent exploration and production companies operating in the United States, Canada, Trinidad, the United Kingdom and China.
The company has a big well in Loving County in the Delaware Basin. Top analysts say the well ranks as one of the best they have ever seen in the basin, and it could easily impact other companies drilling in the region. EOG’s average dollar gross per well on a yearly basis is a stunning $4.3 million, which ranks third among all operators.
Shareholders in EOG are paid a small 0.62% dividend. Baird’s $145 price target compares with a $125.67 consensus price target, as well as the most recent closing share price of $105.81.