One sector that has been on a wild roller coaster ride this year has been energy. After the stunning dip for oil futures into negative territory back in April, the black gold has rallied smartly back up near the $40 level. While $40 per barrel is hardly a huge moneymaker, it at least provides a little cushion for some operators with good balance sheets and manageable debt.
In a series of new reports, Neal Dingmann, the well-respected lead energy analyst at SunTrust Robinson Humphrey, has upgraded three companies to a Buy rating from Neutral, as well as raising their price targets. With gasoline prices for the summer driving season expected to be the lowest in years, and many Americans still nervous about air travel, demand could be poised to jump.
Here are the three new stocks to Buy at SunTrust. It’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
The SunTrust team is very positive on this small-cap energy play. Earthstone Energy Inc (NYSE: ESTE) is a growth-oriented independent oil and gas exploration and production company engaged in developing and acquiring oil and gas reserves through an active and diversified program that includes acquiring, drilling and developing undeveloped leases, asset and corporate acquisitions and exploration activities, with its primary assets located in the Midland Basin of west Texas, the Eagle Ford trend of south Texas and the Williston Basin of North Dakota.
While less known than the other stocks receiving upgrades, this may be a solid pure-play for aggressive investors seeking a higher share count. The analyst noted this in the report:
Earthstone continues to be one of the most financially stable & operationally efficient small cap exploration and production stocks with minimal debt, consistent Midland wells, and low overhead/operating expenses leading to sustainable spending within cash flow. The stock currently trades at nearly the deepest discount of any stock we cover versus the group average. We believe the discount is due to limited float among other things with management noting interest in potential accretive acquisitions & other strategic options.
The SunTrust price target for the stock was raised to $6 from $3, and the Wall Street consensus target is $3.92. The stock closed Thursday’s trading at $3.04 per share, up almost 15% on the day.
This top Permian Basin play for more aggressive accounts could be a takeover target. 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.
Diamondback’s activities are focused primarily on the horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork and Cline formations.