6 Top Energy Stocks That May Be Targets After Encana Buys Athlon

Regardless of the sector, the more competition starts to ramp up, the more you will see major companies looking to make strategic acquisitions to bolster their market share. That is exactly what happened when Encana Corp. (NYSE: ECA) announced an all-cash purchase of Athlon Energy Inc. (NYSE: ATHL) for $7.1 billion. The question for investors now is whether an acquisition phase about to start. If so, who’s next?

A new report from the exploration and productions analyst at UBS suggests that the very positive market reaction following both the Encana deal and another recent transaction may put pressure on inventory short majors and other large-cap companies to pursue a merger or acquisition to increase their respective quality inventory in the U.S. onshore market.

The UBS team lists six top stocks, some of which are already swirling in the rumor mill, as possible targets.

Cabot Oil & Gas Corp. (NYSE: COG) is a top natural gas name on the possible takeover screen at UBS. Even in a challenging gas environment, many on Wall Street believe Cabot has the potential to deliver strong returns and an impressive growth trajectory. Should U.S. natural gas prices prove to be even better than the strip pricing over the next several years, the company stands to benefit as one of the most levered names in the sector.

Cabot investors are paid a miniscule 0.2% dividend. The Thomson/First Call consensus price target for the stock is $41.33. Cabot shares closed Monday at $34.93.

ALSO READ: 8 Analyst Stocks Under $10 With Massive Upside Calls

Concho Resources Inc. (NYSE: CXO) is one of the UBS targets as a top energy play in the Permian Basin in West Texas, which is continuing to explode with production. Concho completed a successful secondary stock offering back in the summer that raised close to $1 billion. The company is using the net proceeds from the offering to repay the debts under the company’s credit facility, as well as for corporate purposes, which includes financing its three-year accelerated growth plan, capital expenditures tied to the recently announced midstream joint venture and potential future asset buys.

The consensus price target for Concho stock is $164.18. The stock closed Monday trading at $130.07 a share.

Oasis Petroleum Inc. (NYSE: OAS) is a company that came in with outstanding earnings this year and last, and it is a very attractive candidate in the booming Bakken shale region. The company’s primary projects are located in West Williston, East Nesson and Sanish. At the end of last year, Oasis reported it had 515,314 net leasehold acres in the Williston Basin and approximately 105.8 million barrels of oil equivalent of proved undeveloped reserves. The company sells its oil and natural gas products to refiners, marketers and other purchasers that have access to pipeline and rail facilities.

The consensus price target for Oasis is posted at a whopping $62.11. Shares closed trading on Monday at $42.44.

Pioneer Natural Resources Co. (NYSE: PXD) is a huge player in the Permian Basin and the Eagle Ford in Texas, and it has been a big winner for shareholders. The company was also one of the firm’s named by the U.S. Commerce Department to produce and export condensates. Rumors have swirled for some time that one of the big integrateds may target Pioneer as a takeover candidate. With their own fracking fleet and huge Midland Basin play, Pioneer is a very attractive, but expensive target.

The consensus target for this top stock is posted at $248.91. Pioneer shares closed Monday at $201.96.

Range Resources Corp. (NYSE: RRC) is another takeover candidate to buy for continued gains in natural gas. The company holds interests in developed and undeveloped natural gas and oil leases in the Appalachian and Southwestern regions of the United States. Range Resources owns 4,637 net producing wells and has approximately 1.6 million gross acres under lease in the Appalachian region. It also owns 1,536 net producing wells and has about 811,000 gross acres under lease in southwestern region.

Investors in Range Resources are paid a small 0.20% dividend. The consensus price target is $96.03, and the stock ended trading Monday at $68.67.

Whiting Petroleum Corp. (NYSE: WLL) is a very large energy player in the Bakken shale, and it is ranked as the third largest producer there. Last year, Whiting sold off significant amounts of its assets that aren’t in the Bakken, including its Postle Field enhanced oil recovery assets for $817 million and its acreage in the Delaware Basin for $150 million. The company has in turn been using the cash from the sales and deploying more assets into the higher-return Bakken this year and will continue to going forward. This makes it very attractive to a larger player looking to add to reserves.

The consensus price target for Whiting stock is $106.87. Shares closed Monday at $80.42.

ALSO READ: The Best and Worst Performing DJIA Stocks in 2014

While there is no guarantee any of these stocks will be acquired, it is much easier for the big integrated giants and other the large cap players to make an acquisition to boost reserves. With the distinct possibility that oil exporting from the United States will come up after the national elections, the big boys may be looking to expand.

Take This Retirement Quiz To Get Matched With An Advisor Now (Sponsored)

Are you ready for retirement? Planning for retirement can be overwhelming, that’s why it could be a good idea to speak to a fiduciary financial advisor about your goals today.

Start by taking this retirement quiz right here from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes. Smart Asset is now matching over 50,000 people a month.

Click here now to get started.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.