Time to rotate on these 2 oil stocks, says Raymond James
We are entering a new paradigm for the oil and gas industry, away from the pro-drilling policies of the Trump presidency. The Biden Administration is likely to cut oil and gas production in the US in favor of promoting renewable energy sources and reduction of carbon pollution. In the short term, their policies are likely to increase oil and gas prices – and may be out to help the hydrocarbon sector, at least on the bottom line, in the coming year. But for oil companies, the lessons of 2020 appear in the balance sheet. Last year in May, prices fell drastically, followed by a quick recovery, only to end the year at roughly the same price as it began – all this for producers to cut spending, consolidate or reduce debt and Is looking to maintain free. Cash flow. In the words of Raymond James oil industry analyst John Freeman: “[We] The 4Q20 earnings and the 2021 capital budget session with the business in question, ironically, essentially have a limit of $ 50s, as we did last year. Although crude is largely in the same place, the industry has definitely given shareholders the highest priority under a strategic shift with balance sheet health and return capital. “In addition to not paying attention to the general trend of the industry after a difficult year, Freeman is also updating his stance on individual oil and gas stocks. Two in particular have attracted Freeman’s attention. He has for each of them At least 50% sees the upside potential. We ran both through TipRanks’ database to see what Wall Street analysts had to say about them. Apache Corporation (APA) with headquarters in Houston, Texas , Apache is an important operator in the North American oil industry. The company’s US hydrocarbon exploration and production activities are located in the Permian Basin, along the Gulf Coast and in Gulf Mexico. Apache operates in the UK (in the North Sea), Egypt (in the Western Desert In) and also in Suriname (offshore). The company’s Permian holdings comprise 66% of its proven reserves, equivalent to 665.8 million barrels of oil. The company beat revenue earnings expectations in the third quarter, $ 1.12 billion in the top line. With. Since reporting Q3 revenue, Apache’s The stock has gained 71%. The company reported Q3 production equivalent to 445,000 barrels of oil per day. Covering the stock for Raymond James, analyst John Freeman writes: “We like Apache’s diversified portfolio of US onshore and international assets (Egypt, North Sea and Suriname), and Apache’s considerable commodity exposure (only 2021 Hedged the headhead base in)), the company is ideally positioned to capitalize on our anticipated resurgence in commodity prices over the 2021/2022 deadline. Adding to this, the operator has a very strong FCF profile. [and] Commitment to capital discipline proved… ”According to these comments, the analyst gives APA a strong buy rating and a price target of $ 24 indicating 60% upside potential over the coming 12 months. (To see Freeman’s track record, click here) Freeman leads the Bulls over Apache. Buy the stock with consensus of analyst based on 12 consensus shares, including 6 buys, 5 hold and 1 sell. The shares are selling for $ 14.94, and their $ 19.30 average price target suggests room for 29% upside growth this year. (See APA Stock Analysis on TipRanks) Diamondback Energy (FANG) also based in Texas, Diamondback Energy is another player in the Permian Basin energy boom. The company has claimed a market cap of $ 8.9 billion and has seen revenue grow by $ 720 million in the third quarter of 2020. Production in this quarter is equal to 287.8 thousand barrels of oil per day. Diamondback has a total oil equivalent of over 1.12 billion barrels in reserves, of which 63% is oil and 37% is natural gas and related liquids. Diamondback is expanding its operations through M&A activity. In December last year, the company announced that it would acquire QP Resources, a natural gas driller operating in Williston, North Dakota as well as the Midland Basin of the Permian Formation. The acquisition is an all-stock deal, valued at an estimated $ 2.2 billion. QEP brings 49,000 acres of land to Midland for potential development, an average production of 48,300 thousand BOE per day, and 48 ‘drilled but incomplete’ wells. These assets are compatible with Diamondback’s portfolio. In a related news, Diamondback has announced that it will also acquire another rival, Texas oil maker Guidan. Gidback brings additional Permian assets to the Diamondbacks, and the acquisition is significant, valued at $ 862 million in both cash and stock. Keeping his eye on the Diamondbacks, Freeman sees the company in a strong position to face the challenges of both the energy situation and the regulatory policies of the Biden administration. “Going forward with the addition of QEP and Gaidino, we estimate Midland accounts for ~ 75% of pro form activity. Note that even after the QEP / Guidelines takeover, FANG still has no federal expansion – a significant positive given regulatory uncertainty will persist after the expiration of the 60-day leasing moratorium… and the company’s weather of proximate commodity uncertainties ‘S ability to trust, ”Freeman said. Unexpectedly, Freeman rates FANH as a strong buy with a price target of $ 91. This figure reflects confidence in ~ 51% growth over the next 12 months. (To see Freeman’s track record, click here) There is widespread agreement on Wall Street with Freeman’s position. FANG stock has a strong buy rating by analyst consensus, based on 13 recent buy reviews against only 3 holds. The average price target is $ 67.37, which is ~ 12% higher than the current trading price of $ 67.37. (See FANG Stock Analysis at TipRank) To find good ideas for oil stock trading at attractive valuations, buy from TipRank’s Best Stocks, a newly launched tool that unites all of TNRank’s equity insights. Disclaimer: The opinions expressed in this article are purely selective analysts. Content is to be used for informational purposes only. It is very important to do your own analysis before making any investment.