Credit Suisse recently gave a recap of 4Q14 earnings season for the exploration and production (E&P) sector. Analysts updated their ratings and price targets for 12 names in the space.
Investors Interested
The stock market is near all-time highs, and the lagging energy sector is one place that investors are looking for potential upside.
According to a Credit Suisse survey, E&P and refiner stocks are drawing particular interest from investors.
Oil Recovery Already Priced In
Analysts concede that crude oil may be near its bottom for this cycle. However, they believe that a sharp recovery in oil prices is already priced into many E&P stocks.
Analysts address this sharp recovery in oil prices, which they “fear may take longer to materialize given the sharp drop in capital costs.”
Service providers have already lowered costs significantly, but analysts believe that total cost reductions could reach 30 percent if the $50/bbl price environment persists.
Top Picks
Given the uncertainty surrounding oil prices, analysts recommend investors take a defensive approach to the sector.
Low leverage and low cost assets make PDC Energy Inc PDCE 1.27%, Diamondback Energy Inc FANG 0.37% and Gulfport Energy Corp GPOR 0.4% Credit Suisse’s top stock picks in the space.
Credit Suisse also updated ratings and price targets for the following 12 stocks:
- Antero Resources Corp AR 3.35%-Outperform; $53 target
- Bonanza Creek Energy Inc BCEI 6.73%-Outperform; $35 target
- Carrizo Oil & Gas Inc CRZO 0.76%- Neutral; $50 target
- Gulfport Energy Corp- Outperform; $64 target
- Magnum Hunter Resources Corp MHR 7.29%-Outperform; $3 target
- Penn Virginia Corp PVA 1.85%-Outperform; $7 target
- Range Resources Corp RRC 0.24%-Outperform; $87 target
- Rosetta Resources Inc ROSE 0.41%-Outperform; $24 target
- Rex Energy Corp REXX 4.38%-Neutral; $4 target
- Sanchez Energy Corp SN 1.48%-Outperform; $17 target
- Swift Energy Co SFY 0.43%- Underperform; $1 target
- Whiting Petroleum Corp WLL 4.28%-Neutral; $41 target
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