The volatile price of natural gas over the past year has weighed some on this top energy company, but recently prices have jumped. ONEOK Inc. (NYSE: OKE) primarily engages in natural gas transportation, storage and natural gas and natural gas liquids (NGLs) gathering, processing and fractionation in the Bakken, Mid-Continent and Permian. The company recently closed the roll-up of its underlying master limited partnership, ONEOK Partners.
The company has a strong presence in the Oklahoma SCOOP/STACK (NGL gathering/takeaway system, G&P), the Williston Basin (G&P, NGL takeaway) and the Permian Basin (NGL gathering, NGL takeaway, natural gas takeaway), which analysts feel provides high-return growth opportunities.
The analysts are also positive on the company’s primarily fee-based earnings, which account for 90% of the total earnings.
Investors are paid a very solid 5.8% dividend. The $79 RBC price objective compares with the $72.89 consensus target price. The shares were last seen trading at $58.98 apiece.
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 2019 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.
Pioneer investors are paid a small 0.23% dividend. RBC has set its price target at $245. The consensus price figure is below that level at $236.81, and Pioneer closed trading on Tuesday at $128.67 per share.
This top energy company is also a solid pick for more conservative accounts. Williams Companies Inc. (NYSE: WMB) is now largely a pure-play domestic natural gas infrastructure company that recently completed the merger with its underlying master limited partnership, Williams Partners.
The company has a lower risk, fee-based business model with some volume sensitivity. Natural gas demand continues to be driven by LNG exports, power generation and industrial needs. In addition to steady demand growth, Marcellus production and associated gas in the Permian are expected to continue to be primary supply drivers.
Shareholders are paid a very sizable 5.59% dividend. The RBC price target is $36. The posted consensus target is $32.71, and the shares closed most recently at $23.93.
Three of these five outstanding ideas from the energy team at RBC are decidedly more conservative. Given their strong and consistent dividends, they offer investors excellent total return potential, and with many positive catalysts on the horizon, the sector could rebound in 2019.