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Simmons & Co Says E&P Names Are Mispriced, Picks 9 Favorites To Play

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Simmons & Co Says E&P Names Are Mispriced, Picks 9 Favorites To Play

Simmons & Co is upping EPS estimates and price targets for oil & gas E&P stocks. According to analyst Pearce Hammond, the firm’s new estimates reflect a mark-to-market update to the forward curve through 2018.

“Our E&P coverage universe (mkt cap weighted) now offers ~13 percent upside potential on average (by rating category: OW +19 percent, N -1 percent, U -30 percent) as upward revisions to our price targets were more than offset by the bounce in equities,” Hammond explained.

Related Link: 'Peak Oil' Not Until 2035, Demand 'Could Well Be Stronger' In Coming Years

Simmons is now calling for crude oil/natural gas prices of $50/$2.75 in 2017, $60/$3.00 in 2018 and $70/$3.50 in 2019 and beyond.

Simmons is also forecasting E&P discretionary cash flow to decline by 50 percent in 2016 and drillbit capex to drop 52 percent this year.

Despite upping its estimates, Hammond says that Simmons’ earnings outlook for the year ahead is still well short of consensus estimates.

The firm’s top large cap stock picks are:

  • Apache Corporation (NYSE: APA)
  • Concho Resources Inc (NYSE: CXO)
  • EOG Resources Inc (NYSE: EOG)
  • Noble Energy, Inc. (NYSE: NBL)
  • Pioneer Natural Resources (NYSE: PXD)

Its favorite SMID names are:

  • Diamondback Energy Inc (NASDAQ: FANG)
  • Newfield Exploration Co. (NYSE: NFX)
  • Parsley Energy Inc (NYSE: PE)
  • Simmons also names Gulfport Energy Corporation (NASDAQ: GPOR) as its top natural gas pick.

    Disclosure: The author holds no position in the stocks mentioned.

    Image Credit: Public Domain

    Latest Ratings for APA

    DateFirmActionFromTo
    Apr 2021SusquehannaUpgradesNeutralPositive
    Apr 2021KeybancMaintainsOverweight
    Mar 2021Truist SecuritiesDowngradesBuyHold

    View More Analyst Ratings for APA
    View the Latest Analyst Ratings

     

    Related Articles (APA + CXO)

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