The eight-year bull market rally has continued in 2017, but somebody forgot to tell the oil and gas industry. The Energy Select Sector SPDR (ETF) XLE 0.24% is down 15.8 percent in 2017, but at least one Wall Street firm believes now is finally the time to buy a handful of exploration and production stocks, as well as certain MLPs.
On Tuesday, Imperial Capital initiated coverage of three E&P stocks and two MLPs with Outperform ratings. Here’s a rundown of what analyst Jason Wangler had to say about each:
- Wangler said MLP Kimbell Royalty Partners LP KRP 2.38% and its 7.4-percent yield provide investors with a sizable distribution payment and the potential for growth once the oil market improves. Kimbell’s history of impressive acquisitions, the company could be a prime candidate for more merger deals down the line as well. Imperial set a $20 price target.
- Wangler said Parsley Energy Inc PE 0.39% has both scope and scale in the Permian Basin and another solid track record of strategic acquisitions. The company has been ramping up its rig counts, adding staff and also recently raised its 2017 production guidance by 3 percent. Imperial set a $36 price target.
- Wangler said Ring Energy Inc REI 1.66% is one of the superstars of the Central Basin Platform and is specifically focusing on the economics of horizontal wells. So far, Ring has gotten great results from its shallower CBP horizontal wells and has plenty of room to expand the technique to other acreage in the future. Imperial set an $18 price target.
- Wangler said RSP Permian Inc RSPP 0.22% has a presence in both the Midland and Delware Basin and is targeting most of its 2018 drilling capex toward its top-tier, high-return locations. RSP Permian has taken a very responsible approach to acquisitions, always staying mindful of the health of its balance sheet along the way. Imperial set a $42 price target.
- Finally, Wangler said…
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