Once it was the hottest oil and natural gas production region in the United States, and the top companies focused on the Permian Basin in West Texas and New Mexico performed well. Recently though, the ability to transport production has been hampered by pipeline capacity issues. As a result, some of the top Permian stocks have been hit hard, and investors are literally being offered some of the best entry points in years.
The SunTrust energy team, led by analyst Neal Dingmann, met with numerous companies last week, including those in the Permian Basin, and remain positive on the future.
The SunTrust report noted this:
We expect multiple catalysts ahead ie. notable well results/acquisitions. While Permian takeaway issues are obviously real, we believe most companies could fare better for the remainder of 2018 than prior estimates. We remain as positive on a number of exploration and production companies.
Five companies were highlighted as favorites from the analyst’s company visits, and all are rated Buy at SunTrust.
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.
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 0.3% dividend. The SunTrust price target for the stock is $135, and the Wall Street consensus target is $125.03. The shares closed Monday at $97.66.
This is a top Permian Basin play for more aggressive accounts. 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.
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 $162 price target, while the consensus target is $159.88. The shares closed Monday at $129.30.