Energy

5 Energy Stocks to Buy Now With 100% or More Implied Upside

Lee Jackson

Published: April 9, 2019 6:50 am

Last Updated: January 30, 2020 10:21 pm

Another day, another big move in the benchmark price of oil. As we have noted recently here at 24/7 Wall St., despite the massive price gains of both West Texas Intermediate and Brent crudes since the end of 2018, most of the stocks in exploration and production and in oilfield services have lagged this swing higher.

With the busy summer driving season right around the corner, and some hints that economies in both Europe and China may be improving, there is a good chance that while the big moves higher in oil may slow, the potential for some of the top stocks in the sector remains very likely.

The energy team at Stifel is very positive on the current direction of the energy sector, so we screened the firm’s energy universe research coverage looking for stocks rated Buy with the biggest upside to the Stifel assigned price target. We found five with massive, triple-digit upside potential that could be great additions to growth portfolios now.

Chaparral Energy

This energy stock has been obliterated and may have massive upside. Chaparral Energy Inc. (NASDAQ: CHAP) engages in the onshore oil and natural gas acquisition, exploitation, exploration and production. It focuses on deposits of Stack, Meramec and Osage, Oswego and Woodford, located in Oklahoma and the Texas Panhandle. As of March 29, 2018, it had estimated potential reserves of a billion barrels of oil equivalent.

Chaparral announced recently that it anticipates 2019 total company production to be between 25,000 and 27,000 barrels oil equivalent per day, which represents an anticipated 22% to 32% year-over-year growth. Total Stack production is expected to be between 21,000 and 23,000 barrels oil equivalent per day, which would be a year-over-year growth rate of 45% to 59%. While full-year production will have significant growth, first-quarter production will be impacted by the timing of first sales associated with Chaparral’s current spacing tests and remaining drilling joint venture wells.

Stifel has a gigantic $22 price target on the shares, which is even higher than the huge $18.38 Wall Street consensus target. The shares were last seen trading on Monday at $5.51.

Carrizo Oil & Gas

This is a top energy stock for value buyers to consider. Carrizo Oil & Gas Inc. (NASDAQ: CRZO) is a Houston-based energy company actively engaged in the exploration, development and production of oil and gas from resource plays located in the United States. Carrizo’s current operations are principally focused in proven, producing oil and gas plays, primarily in the Eagle Ford Shale, the Utica Shale in Ohio, the Niobrara Formation in Colorado and the Marcellus Shale in Pennsylvania.

Many on Wall Street see the company as one of the best positioned due to the low breakeven costs, solid operating scale and a very good balance sheet with ample liquidity. Top analysts also think the company may take advantage of difficult situations for others and make acquisitions, especially in the Eagle Ford.

The Stifel price target on the stock is a stunning $44, while the consensus target is down at $19.30. The stock closed most recently at $13.45 a share.

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Concho Resources

Last year, this company bought RSP Permian for $9.5 billion, and most on Wall Street loved the deal. Concho Resources Inc. (NYSE: CXO) is an independent oil and natural gas company engaged in the acquisition, development and exploration of oil and natural gas properties.

It offers investors a unique combination of investment themes, including valuation, rate-of-change and resource expansion themes. The company is the largest acreage holder of the publicly traded Permian large-caps and provides investors peer-leading exposure to three of the most impactful catalysts across the Delaware Basin, including the Wolfcamp XY, Wolfcamp D and Bone Spring Shale.

Concho Resources has reported strong earnings but still has a lot of upside to the posted price targets.

Concho Resources pays a small 0.45% dividend. The gigantic $239 Stifel price target compares with a posted consensus target of $154.95. The shares closed Monday’s trading at $112 apiece.

Parsley Energy

This is another 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 its acreage sits on the Midland side of the basin, but the company also holds a small acreage position in the Delaware Basin. 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 a catalyst rich and is 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 also is rapidly de-risking its drilling inventory and is well-positioned to continue to beat its strong growth projections.

Stifel has its price target set at $38. The consensus price target is $27.11, and the stock closed trading at $19.07 on Monday.

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QEP Resources

This energy stock has had a nice run off the bottom but still holds huge upside potential. QEP Resources Inc. (NYSE: QEP) is a holding company that engages in the exploration and production of oil and natural gas properties. It focuses in the Northern Region (primarily in North Dakota, Wyoming and Utah) and the Southern Region (primarily in Texas and Louisiana).

Aethon Energy Management recently announced the completion of its acquisition of natural gas assets from wholly owned subsidiaries of QEP Resources. The assets are located in the Haynesville basin in northwest Louisiana. The QEP assets comprise approximately 49,700 net acres and 607 operated wells of natural gas producing properties and undeveloped acreage in the Haynesville. Aethon III also acquired all of QEP’s associated gas gathering and treating systems related to these assets, supporting up to 600 millions of cubic feet equivalent per day of production.

The collective reserve base of QEP’s assets combines low risk, long life and highly predictable production with attractive development opportunities.

Stifel has a massive $18 price objective on the stock. The consensus target was last seen at $110.30, and the shares ended Monday at $8.28.

These five top oil stocks with huge 100% or more upside potential to the Stifel price targets also could be possible takeover targets. Even if none of them hit the huge price targets completely, they are all very cheap and trading at valuations that make them great additions to aggressive portfolios in which investors are looking to add energy.