SunTrust Robinson Humphrey looked at six potential targets recently and we matched those with our own data on Buy-rated E&P stocks and found that all six were top picks. One, EOG Resources Inc. (NYSE: EOG), has a market cap of $61.47 billion, even larger than Occidental’s $45.45 billion cap, and would not be a likely target for any but the largest supermajors.
The largest by market cap is Pioneer Natural Resources Co. (NYSE: PXD), which is valued at $29.37 billion. Pioneer is a huge player in the Permian Basin and the Eagle Ford, 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. Pioneer pays a tiny 0.32% dividend and shares traded Wednesday morning at $174.35, down about 0.8%, in a 52-week range of $119.08 to $213.40. The consensus price target on the stock is $196.88.
Concho Resources Inc. (NYSE: CXO) has a market cap of $24.23 billion and is the largest acreage holder of the publicly traded Permian large-caps and provides investors peer-leading exposure to three of the best catalysts across the Delaware Basin, including the Wolfcamp XY, Wolfcamp D and Bone Spring Shale. Concho pays a 0.45% dividend, and shares traded Wednesday morning at $121.70, down about 0.7%, in a 52-week range of $93.31 to $163.11. The consensus price target is $153.97.
With a market cap of $13.37 billion, Noble Energy Inc. (NYSE: NBL) has operations in the Permian and other U.S. basins, but its principal focus right now is a massive natural gas project in Israel. Noble pays a 1.99% dividend, and shares traded Wednesday morning at $27.88, up about 0.1%, in a 52-week range of $17.11 to $37.76. The consensus price target is $32.80.
PDC Energy Inc. (NYSE: PDCE) has a market cap of $3.04 billion and is a diversified E&P outfit with assets in the Rockies, the Permian and Utica Shale. The company recently acquired a 55,000 net acre position in the Permian. PDC is targeting 10% to 15% production growth in 2020, and progress continues with operating expense improving and well cost declining in the Delaware with longer laterals and modified completion design. PDC does not pay a dividend, and shares traded Wednesday morning at $46.03, down about 1.2%, in a 52-week range of $26.59 to $66.20. The consensus price target is $55.83.
SRC Energy Inc. (NYSE: SRCI) is a small-cap ($1.56 billion) E&P company with net proved oil and natural gas reserves of 88 million barrels of oil and condensate, 771.9 billion cubic feet of natural gas and 89.1 million barrels of natural gas liquids in the Denver-Julesburg Basin. SRC also pays no dividend, and traded down about 2.4% Wednesday at $6.43 in a 52-week range of $4.01 to $13.32. The consensus price target is $8.22.
One interesting observation regarding these potential targets is that the smaller ones are showing the most damage today. That could mean that consolidation among the small E&P firms is fading.
About two weeks ago, analysts at Stifel named five stocks that showed an implied upside of 100% or more. In addition to Concho, the others were Chaparral Energy Inc. (NASDAQ: CHAP), Carrizo Oil & Gas Inc. (NASDAQ: CRZO), Parsley Energy Inc. (NYSE: PE) and QEP Resources Inc. (NYSE: QEP).