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.

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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 APA
• Concho Resources Inc CXO
• EOG Resources Inc EOG
• Noble Energy, Inc. NBL
• Pioneer Natural Resources PXD

Its favorite SMID names are:

Simmons also names Gulfport Energy Corporation GPOR as its top natural gas pick.

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