Those on Wall Street that were bearish on the oil patch certainly have changed their tune, and with good reason. After bottoming in 2014 at an incredible $26 per barrel, the price has jumped over the $70 mark, getting nudged even higher by the United States departing the Iran deal and the former glut in supply finally being erased. While nobody really wants to see a $100 per barrel price, as that would start to choke off the economic growth, it’s possible $80 could be in sight.
Like many on Wall Street, SunTrust Robinson Humphrey applauded the outstanding first-quarter numbers posted by the companies in its research coverage universe. In a new research report, the firm also noted that most gave solid forward guidance as well.
The report had this to say:
Most exploration and production companies in our coverage universe turned in strong quarters along with equally as impressive guidance for the remainder of 2018. When examining the winners, there appears to be little discretion between what play they operate or market capitalization. What is noticeable is that nearly all the best performers had solid leverage and/or are quickly working on getting there. Lastly, we believe that nearly all names on the list still have material upside from current levels as judged by our price targets that are materially higher.
Given the huge production numbers coming out of the Permian Basin, we screened the SunTrust stocks rated Buy that have a big footprint there. These five have big upside to the analyst price targets.
This 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. It has scattered positions around some of the top producing wells in the region.
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.
Investors receive just a 0.65% dividend. The SunTrust price target for the stock is $130. The Wall Street consensus price target is higher at $134.42. The shares closed Thursday at $97.82.
This is a top Permian Basin play for more aggressive accounts and is a top pick across Wall Street. Diamondback Energy Inc. (NASDAQ: FANG) is an independent oil and natural gas company headquartered in Midland, Texas, and focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.
Diamondback’s activities are primarily focused on the horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork and Cline formations.
Wall Street analysts have noted in the past the company’s top-tier asset base, solid accretive additions and financial discipline, which they think allows for not only continued solid cash flow, but could put the company in play as a takeover target. Diamondback continues to drill some of the most economical wells in the United States as efficiencies improve, costs decrease and activity remains in the better regions.
SunTrust has a $165 price target, and the consensus target is $156.67. Shares closed Thursday at $129.79.
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