Despite the ups and downs of the market, oil has consistently stayed over the $60 a barrel level, yet many oil stocks have struggled. The good news for investors is that one firm we cover on Wall Street, RBC Capital Markets, thinks that West Texas Intermediate crude can average $66 a barrel this year and $64 next year. While a long way from the heady days of $100 a barrel, it’s also a solid price level compared to when oil plunged to $26 in 2014.
With oil demand expected to keep expanding over the next five years, the United States will fulfill most of the world’s growing appetite, according to the International Energy Agency. Much of that production is expected to come from the vast resources in the Permian Basin of West Texas.
We screened our Wall Street database for the companies that should benefit and that do a large amount of exploration and production in the Permian. We found five that Baird covers that make good sense now.
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.
Cimarex investors are paid a small 0.7% dividend. The Baird price target for the stock, which is posted at a whopping $136, compares with a Wall Street consensus target of $142.73. The stock closed Wednesday’s trading at $92.69 a 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 just a 0.62% dividend. Blair has a $145 price target for the shares, while the consensus target was last seen at $125.67. The stock closed trading most recently at $100.87 per share.