Stifel Says Energy Stocks Are Historically Cheap With Huge Upside Potential

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PDC Energy

This smaller cap name is somewhat off the radar but has tantalizing assets for a company looking to add growth potential. PDC Energy Inc. (NYSE: PDCE) is a diversified exploration and production company with assets in the Rockies, Permian and Utica Shale. The company’s core position is in the Wattenberg, with 100,000 net acres alongside a recently acquired 55,000 net acre position in the Permian Basin.

The company is targeting 10% to 15% production growth in 2020, and operating progress continues with operating expense improving and well cost declining in the Delaware with longer laterals and modified completion design.

Stifel has set a $57 price target on PDC. The consensus target is $57.42, and the shares ended Thursday at $30.53.

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 in 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 its stellar balance sheet, the company looks poised to remain a top player in the Permian because it expects to deliver solid production growth in 2019 and beyond.

Investors receive a 0.38% dividend. The Stifel price target is $322. The consensus figure is $204.61, and Pioneer closed most recently at $144.43.

WPX Energy

This is yet another smaller cap company with solid upside potential and also another top Permian Basin play. WPX Energy Inc. (NYSE: WPX) is an independent oil and natural gas exploration and production company that engages in the exploitation and development of unconventional properties in the United States. Its principal areas of operation include the Permian Basin, the Williston Basin in North Dakota and the San Juan Basin in New Mexico and Colorado.

WPX is a premier Permian-levered operator with sector-leading debt-adjusted cash flow growth supported by strong execution in the core Delaware, all while trading at Williston valuations primarily due to its relatively high financial leverage.

Stifel analysts have a $28 price target. The consensus price objective is $19.50, and shares closed at $10.93.

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Obviously, Stifel favors companies with big Permian footprints, and with good reason. The massive purchase of Anadarko by Occidental Petroleum back in March put the spotlight directly on these companies and others in the region as potential takeover targets. That plus the incredibly cheap valuations makes them good additions to growth accounts with a long-term time frame.