We cover almost all the top firms on Wall Street, and most do a fine job with overall market coverage. In addition to casting the proverbial broad net, some also are very proficient in covering specific sectors like energy. One of those companies is RBC, which is considered among the leaders in the coverage of the sector, and its Global Energy Best Ideas list is one of the reasons why.
For March, the RBC Global Energy Best Ideas List was up 2.3%, compared to the S&P Global Energy Sector’s increase of 1.7%. Since its inception in February 2013, the RBC Global Energy Best Ideas List is up 14.2%, compared to the S&P Global Energy Sector exchange traded fund at −4.5%. While past performance is no guarantee for the future, a good track record is worth following.
We studied the April research and found five companies with shares that trade in U.S. dollars that look like outstanding plays going forward. With sentiment toward the sector improving, and oil prices consistently over the $60 a barrel level and rising, energy is a good area to look at for the second quarter.
Centennial Resource Development
Shares of this off-the-radar company could have solid upside potential. Centennial Resource Development Inc. (NASDAQ: CDEV) is a pure-play Permian oil and gas producer. The company holds 87.9 thousand net acres across the Delaware Basin, with its largest position in Reeves and Pecos, Texas, (76.1 thousand net acres) and recently acquired position in Lea County, New Mexico, (11.9 thousand net acres), the company’s legacy position, which was held since the time of its initial public offering in late 2016, covers 42.5 thousand net acres in Reeves, Pecos and Ward counties.
The company posted solid fourth-quarter results with 2020 production targets raised to 65,000 barrels of oil equivalent per day. It also highlighted positive well results (3rd Bone Spring) that suggest inventory upside. It should be noted that the company’s 2018 capex outlook came in above expectations.
The RBC price target for the shares is $26, and the Wall Street consensus target is $26.10. The stock was trading early Tuesday at $17.15.
This stock is still down over 20% from highs printed in January and remains a top large-cap oil services pick on Wall Street. Halliburton Co. (NYSE: HAL) is one of the world’s largest providers of products and services to the energy industry. It serves the upstream oil and gas industry throughout the life cycle of the reservoir, from locating hydrocarbons and managing geological data to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.
Halliburton is the second-largest provider of oil services and the number one player in pressure pumping services worldwide. For investors looking for an oilfield services company to add, this is arguably the best, and analysts feel it will be a huge benefactor as the frac market has tightened significantly and prices are 20% to 30% off the lows.
The company posted solid fourth-quarter results that topped analysts’ estimates, driven by better pricing and increased activity in every reporting region. Earnings per share beat the highest consensus estimates on robust review, with particular strength internationally.
Halliburton shareholders are paid a 1.56% dividend. The RBC has a whopping $65 price target, while the consensus target is $63.19. The shares were trading early Tuesday at $46.00.