This lesser known company is a solid play for those looking for Permian Basin exposure at a reasonable price. Energen Corp. (NYSE: EGN) is a pure-play Permian operator with 147,000 net acres in the basin. The majority of its development activity targets the Midland and Delaware Basin, where the company holds 87,000 and 60,000 net acres respectively. Energen also holds an 84,000 net acre position in the Platform area where minimal capital investment is expected.
Top analysts feel that Energen is a rare breed, with strong debt-adjusted growth, inventory depth from a quality and blocky Permian footprint, balance sheet and value. Recent Generation 3 completions show promise for a step-change in well productivity, and none of that appears baked into guidance or street estimates.
The $85 SunTrust target price is well above the consensus target of $74.85. Shares closed Thursday at $68.73.
This is smaller capitalization stock for aggressive investors to consider. Parsley Energy Inc. (NYSE: PE) is an oil and gas producer with 227,000 net acres in the Permian Basin. The majority of acreage sits on the Midland side of the basin, but the company also holds a small acreage position in the Delaware Basin.
The company had 222 million barrels of oil equivalent of proved reserves at the end of 2016, of which 61% was oil. Through strategic acquisitions and acreage swaps, it has grown its acreage position since its initial public offering and has over 7,900 horizontal locations across multiple prospective zones.
The company is catalyst rich and a Permian Basin pure play. Parsley Energy has some of the strongest wells in the basin, generating returns that are among the best in the industry. It is also rapidly de-risking its drilling inventory and is well-positioned to continue to beat its strong growth projections.
SunTrust has set its price target at $45 The consensus target is $39.15, and shares closed Thursday at $32.84.
Pioneer Natural Resources
Many Wall Street analysts love this stock for a pure crude oil play. Pioneer Natural Resources Co. (NYSE: PXD) operates a modern fleet of more than 24 top performing drilling rigs throughout onshore oil and gas producing regions of the United States and Colombia. Pioneer production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units, and a range of advanced coiled tubing units.
Pioneer is a huge player in the Permian Basin and the Eagle Ford in Texas, and the company owns more than 20,000 locations in the world’s second-largest oil reservoir in the Midland Basin. With a stellar balance sheet, the company is poised to remain a top player in the Permian as it expects to deliver solid production growth in 2018 and beyond.
The company’s unmatched depth of low-cost inventory and balance sheet allow it to compete favorably in both mild and moderate recovery case scenarios. In addition to asset and financial strength, many analysts feel that Pioneer offers the second highest multiple contraction among the large-cap Permian pure-play peers, as well as the highest free-cash-flow yield.
Investors receive a 0.05% dividend. The SunTrust price target is $235. The consensus price figure is $230.01, and shares closed at $203.19 on Thursday.
These five top stocks all make good sense for investors looking to add energy, especially companies with Permian Basin exposure. They are also smart plays now considering that some also could be takeover candidates. Despite the recent buying, most are still offering timely entry points for investors with a long-term horizon, and with oil potentially going higher, now is the time to add or initiate positions.