This smaller independent could be an outstanding play for more aggressive accounts. Oasis Petroleum Inc. (NYSE: OAS) is an independent exploration and production company that focuses on the acquisition and development of unconventional oil and natural gas resources in the North Dakota and Montana regions of the Williston Basin. Its principal projects are located in West Williston and East Nesson.
With 518,000 net acres across North Dakota and Montana, Oasis had 305 million barrels of oil equivalent per day of proved reserves at year’s end 2016 that were 62% developed and 78% liquids. The company also has identified about 2,200 gross operated locations targeting the Middle Bakken and Three Forks formations.
The analyst is very positive on valuations, and noted this:
Despite acquiring a Delaware asset in 2017, we still estimate the company trades at a ~0.5x discount to the group on 2019 EBITDA and at an even greater discount to Delaware pure-plays. With Oasis self-funding E&P capex and the addition of a premium multiple asset, we think the company trading near historically low levels vs. the group (2020 Enterprise Value to EBITDA) creates an attractive opportunity.
The $13 Jefferies price target compares with the $12.21 consensus figure. The shares traded at $10.95 Wednesday morning.
This is a top play for investors looking to the Permian Basin, though it was started with a Hold rating at Jefferies. 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.
The analyst said this when discussing Cimarex:
While completion intensity-driven improvements are encouraging, the company is currently on the leading edge and will likely experience less “rate of change” relative to peers. With minimal basis hedging or FT to mitigate these Delaware concerns, we think a historic multiple premium will no longer be awarded.
Cimarex investors are paid a small 0.64% dividend. Jefferies has a $100 price target. The posted consensus target is set much higher at $134.58, but the shares were trading at $99.70.
Given the situation, it is looking increasingly like sanctions could be reimposed on Iran, and that should move oil prices higher, even if just for the short term. The three stocks rated Buy the analyst likes are not overcrowded and offer good value for investors looking to add energy.