With crude inventory dipping last week, investor focus has locked in on the space. While analysts had originally expected inventory to increase, data obtained from the American Petroleum Institute found that U.S. Crude inventory dropped by 708,000 barrels. That being said, broader economic concerns have outweighed any inventory declines.
“Slowing global activity will see demand drop, so the reality is that oil rallies will be limited,” OANDA senior market analyst Jeffrey Halley commented.
However, this is not to say that compelling investments can’t be found in the industry. Using the TipRanks’ Best Stocks to Buy tool, we were able to zero in on 3 energy stocks that boast electrifying upside potential from the current share price. If that’s not enough to convince investors, each name has earned a ‘Strong Buy’ consensus rating based on all of the recommendations issued in the last three months.
Let’s drill a little deeper.
Enerplus Corporation (ERF)
Enerplus has made a name for itself as one of the largest oil and gas producers in Canada, with it primarily focusing on the development of North American oil as well as its natural gas assets. While shares have struggled year-to-date, analysts believe that ERF’s recent solid performance reaffirms its strong long-term growth narrative.
ERF’s portfolio is made up of light oil assets in the Williston Basin in North Dakota and Montana, a position in the Marcellus natural gas shale play in northeast Pennsylvania as well as a group of oil assets under secondary and tertiary recovery in western Canada. During its second quarter, total production increased 14% quarter-over-quarter, with liquids production also rising 16%. These gains were partially due to its 22% increase in volumes in the Bakken region, located in North Dakota and Montana.
Adding to the good news, management noted that it had drilled five gross and four net wells in the DJ Basin in Colorado during the quarter. If everything goes according to plan, these wells should be completed by the end of the third quarter and can hopefully be brought to production at the same time as its new pipeline connection to a third-party gas plant. The pipeline is expected to be finished by the end of the year.
CIBC analyst Jamie Kubik calls ERF his “top idea” in the sector based on this impressive quarter. As a result, the analyst reiterated his Buy rating and $11 price target. At this target, he thinks shares could surge 82% over the next twelve months. (To watch Kubik’s track record, click here)
With only bullish ratings assigned in the last three months, it’s clear that other Wall Street analysts believe ERF is a “Strong Buy.” In addition, its $11.55 average price target brings the total upside potential to 90%. (See Enerplus stock analysis on TipRanks)
Gran Tierra Energy (GTE)
Gran Tierra is a global oil and gas exploration company operating in South America. Despite the fact that it faced headwinds in its second quarter, one top analyst is maintaining his bullish thesis.
5-star RBC Capital analyst Al Stanton tells investors that while the company’s production was impacted by operational problems, these issues have been resolved. On top of this, GTE posted better-than-expected financial results in its most recent quarter.
The energy name has also seen operational success, with its Acordionero-48 location being cited as especially promising. Stanton notes that production at this site should get an additional boost as the facility expansion was recently completed.
Stanton reminds investors that key upcoming catalysts could push share prices to new heights. “Management has highlighted that H2/19 has many potential catalysts, including the drilling of 13-15 development and exploration wells, with planned appraisal of the Lisama E Sand in Acordionero and drilling of Vonu Este-1 well targeting fractured A-Limestone and the U Sand,”.
Bearing this in mind, Stanton reiterated his bullish recommendation and $3 price target on GTE stock. Clearly, the analyst is confident that shares could jump 157% in the next twelve months. (To watch Stanton’s track record, click here)
The rest of Wall Street echoes Tierra’s bullish play, as TipRanks analytics exhibit GTE as a Strong Buy. Out of 4 analysts polled in the last 3 months, 3 are bullish on GTE stock while 1 remains sidelined. With a huge upside potential of over 170%, the stock’s consensus target price stands at $2.86. (See Gran Tierra Energy stock analysis on TipRanks)
Whitecap Resources (SPGYF)
Based in Calgary, Whitecap is an exploration and production (E&P) name with development focused on the Cardium oil play in Alberta and Viking oil play in Saskatchewan. Amid the backdrop of market uncertainty and significant volatility in commodity pricing, top rated analyst, Luke Davis of RBC Capital, is picking this energy stock thanks to its cost reduction plans.
SPGYF is making a significant effort to tighten the belt when it comes to spending. As a result of commodity prices, the company has cut its spending for the year from $425-$475 million to $400 million, leaving $250 million for the second half of 2019. Even with this reduction, production volumes should remain resilient in 2019.
The analyst adds that part of the appeal lies in the fact that Whitecap presents unique opportunity based on its low-risk growth trajectory. “We believe Whitecap can deliver above-average per share growth from low-risk drilling in established light oil plays, which are supported by waterflood and enhanced oil recovery (EOR) projects. Whitecap’s acquire and exploit track record is reflected in an above-average recycle ratio since inception,” he explained.
Not to mention its Weyburn CO2 project represents a foundational low-decline property with low risk expansion potential, according to Davis. Based on all of the above factors, the 4.5-star analyst kept his Buy rating while slightly lowering the price target to $5. Nonetheless, he still sees upside potential of 61%. (To watch Davis’ track record, click here)
The rest of the Street appears to echo the analyst’s sentiment. 4 Buy ratings compared to 1 Hold assigned in the last three months give it a ‘Strong Buy’ consensus. It doesn’t hurt that the $5 average price target implies 80% upside potential. (See Whitecap Resources stock analysis on TipRanks)