Wall Street's 15 favorite energy stocks as oil prices rebound

There are signs of better times ahead for U.S. energy producers.

  • By Philip van Doorn,
  • MarketWatch
  • Energy Sector
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Oil prices have surged 16% in a month, leading to speculation there might be a sustained rally for the most widely traded commodity. That, of course, would help shares of U.S. oil-related companies, which have made efforts to become more efficient when energy prices starting tumbling in the summer of 2014.

So we have put together a list of the most highly rated oil-related stocks for investors.

The chart (right) shows that West Texas crude oil at about $50 a barrel, is still down 50% from where it was three years ago. A month ago, it was trading at $43.03:

Signs of better times

OPEC Secretary General Mohammad Barkindo has expressed confidence that Russia will participate in the cartel's effort to cut oil production to boost prices.

Phil Flynn, senior analyst at Price Futures Group, said in his daily Energy Report on Tuesday that "oil is running hot on a weak dollar and U.K. inflation data." He also said recent comments from Federal Reserve Chairwoman Janet Yellen about a strengthening U.S. economy was another "signal" that oil prices could keep rising.

"Even as the Fed embarks on its first interest rate adjustment in a year in December, the proclamation by the Fed chair is that the economy could run oil to our $60 a barrel target," Flynn said.

Shale producers' improvement

On Tuesday, Jefferies analyst Brad Handler said in a report on oil-services and oil-equipment providers that he had become "more optimistic regarding pricing improvement in 2017 — likely in regional pockets at first and then, for hydraulic fracturing, with additional impetus from earning a return on capital to bring equipment back to work."

He said domestic land-based production this year had shown "convincing evidence" that enhancements to productivity were "tangible (and by implication sustainable)."

Handler made significant increases in his estimates for average hydraulic fracturing rig counts for 2017 to 710 from 550 and for 2018 to 984 from 840. He made clear in an email exchange that these changes were based on industry improvements and not recent oil-price increases. He continues to expect an average price for West Texas intermediate crude oil of $57 a barrel in 2017, rising to $71.75 in 2018. His long-term "normalized" price forecast for oil is $80 a barrel.

Analysts' favorite energy stocks

There are 84 energy-sector stocks in the S&P 1500 Composite Index, which is made up of the S&P 500 (.SPX), the S&P 400 Mid Cap Index (.MID), and the S&P 600 Small Cap (.SML).

Here are the 15 energy stocks with "buy" or equivalent ratings from at least 75% of analysts polled by FactSet, sorted by implied upside, based on consensus price targets:

Company Ticker Industry Share of analysts rating the shares 'buy' Closing price - Oct. 17 Consensus 12-month price target Implied upside potential
Tetra Technology Inc. TTI Oilfield Services/Equipment 93% $5.85 $8.28 41%
Synergy Resources Corp. SYRG Oil and Gas Production 87 7.08 9.30 31
Exterran Corp. EXTN Oilfield Services/Equipment 100 16.43 20.50 25
Era Group Inc. ERA Oilfield Services/Equipment 100 8.13 10.00 23
PDC Energy Inc. PDCE Oil and Gas Production 75 63.55 78.00 23
Matrix Service Co. MTRX Engineering and Construction 83 18.42 22.40 22
Marathon Petroleum Corp. MPC Oil Regining/Marketing 81 41.85 50.08 20
REX American Resources Corp. REX Oil and Gas Production 100 81.63 94.50 16
Carrizo Oil & Gas Inc. CRZO Oil and Gas Production 85 39.81 45.96 15
Schlumberger NV SLB Oilfield Services/Equipment 80 80.98 92.48 14
Anadarko Petroleum Corp. APC Oil and Gas Production 76 62.51 70.26 12
Pioneer Natural Resources Co. PXD Oil and Gas Production 87 184.28 206.07 12
Halliburton Co. HAL Oilfield Services/Equipment 85 46.32 51.54 11
U.S. Silica Holdings Inc. SLCA Metals/Minerals 83 47.05 50.80 8
Concho Resources Inc. CXO Oil and Gas Production 76 136.93 147.65 8

Source: MarketWatch

If you are looking to "play" what looks like an improved oil market, it's important to do more research on your own, with the assistance of your broker or adviser. If you are considering a company, how do you feel about its business plan and its financial outlook? Only then can you make a long-term commitment.

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