Deep Dive: Analysts expect these energy stocks to rise the most in 2018 as oil rebounds

Oil has failed to stage a sustained rally so many times, you couldn’t blame an investor from avoiding the industry altogether.

But this time might be different.

West Texas Intermediate (WTI) crude oil CL1, -2.63% rose 21% to $57.62 a barrel as of Dec. 5 from Aug. 21. On Dec. 4, Goldman Sachs increased its 2018 price forecast for WTI to $62 from $55.

A year ago, many energy-industry analysts and market gurus expected 2017 to be a year of massive gains for energy stocks amid an oil recovery. It didn’t turn out that way, as the price stalled in March and then again in May and June:

The four-year chart gives a broad perspective:

This chart shows oil price changes and the total return for the S&P 1500 energy sector over the past 12 months:

On Aug. 22, Phil Flynn, a senior market analyst at Price Futures Group, said in his daily energy report that “the market should be expecting a big drop in crude-oil supply” because of OPEC’s production cuts and “signs that U.S. oil output from shale may be peaking.”

A report from the Energy Information Administration (EIA) on Wednesday showed a surprising increase in gasoline prices, along with an expected decline in U.S. oil supplies. After expressing doubt that U.S. gasoline supplies jumped during the Thanksgiving holiday break, Flynn said on Wednesday that “it is very disturbing that week after week we have to continue to question the accuracy of these weekly figures.”

So we may once again be in for some volatility, and can expect the EIA to release revised figures.

How the biggest U.S. players have fared

Before showing you which energy stocks are most favored by analysts for 2018, here’s how shares of the 10 largest energy companies, ranked by market capitalization, have performed this year:

Company Ticker Market capitalization ($mil) Total return – 2017 through Dec. 5
Exxon Mobil Corp. XOM, -0.74% $351,214 -5%
Chevron Corp. CVX, -0.65% $228,666 6%
Schlumberger N.V. SLB, -2.17% $87,895 -22%
ConocoPhillips COP, -1.66% $61,246 4%
EOG Resources Inc. EOG, -2.02% $58,342 0%
Occidental Petroleum Corp. OXY, -1.04% $53,567 2%
Phillips 66 PSX, -0.69% $50,266 18%
Kinder Morgan Inc. Class P KMI, -0.18% $38,278 -15%
Halliburton Co. HAL, -0.16% $38,069 -18%
Valero Energy Corp. VLO, -0.94% $37,536 31%
Source: FactSet

Here’s how analysts view these big names:

Company Ticker Share ‘buy’ ratings Share neutral ratings Share ‘sell’ ratings Closing price – Dec. 5 Consensus price target implied 12-month upside potential
Exxon Mobil Corp. XOM, -0.74% 29% 46% 25% $82.89 $83.96 1%
Chevron Corp. CVX, -0.65% 64% 32% 4% $120.39 $124.33 3%
Schlumberger N.V. SLB, -2.17% 69% 31% 0% $63.45 $74.38 17%
ConocoPhillips COP, -1.66% 70% 30% 0% $51.23 $56.35 10%
EOG Resources Inc. EOG, -2.02% 58% 42% 0% $100.90 $109.97 9%
Occidental Petroleum Corp. OXY, -1.04% 31% 61% 8% $70.00 $67.65 -3%
Phillips 66 PSX, -0.69% 38% 52% 10% $98.27 $96.67 -2%
Kinder Morgan Inc. Class P KMI, -0.18% 57% 43% 0% $17.14 $23.11 35%
Halliburton Co. HAL, -0.16% 84% 13% 3% $43.63 $52.19 20%
Valero Energy Corp. VLO, -0.94% 42% 58% 0% $85.78 $84.25 -2%
Source: FactSet

Six of the 10 have majority “buy” or equivalent ratings among sell-side analysts polled by FactSet.

Analysts’ favorite energy stocks

To put together a list of the 10 energy stocks most favored by analysts for 2018, we began with the energy sector of the S&P 1500 Composite Index, which is made up of the large-cap S&P 500 SPX, -0.01% the S&P 400 Mid-Cap Index MID, -0.43%  and the S&P Small-Cap 600 index SML, -0.51% That’s 85 companies, to which we added all 87 U.S. and Canadian energy master limited partnerships (MLPs), which are not included in the S&P indices.

Of the combined 172 companies, 74 have majority “buy” ratings and are covered by at least five analysts.

Here are the 15 for which analysts see the most upside potential over the next 12 months:

Company Ticker Share ‘buy’ ratings Share neutral ratings Share ‘sell’ ratings Closing price – Dec. 5 Consensus price target implied 12-month upside potential
Contango Oil & Gas Co. MCF, -2.29% 62% 38% 0% $2.62 $6.21 137%
Range Resources Corp. RRC, -4.51% 68% 29% 3% $17.28 $28.59 65%
Green Plains Inc. GPRE, -1.52% 100% 0% 0% $16.50 $26.11 58%
Sanchez Midstream Partners LP SNMP, -0.96% 80% 20% 0% $10.40 $15.88 53%
Gulfport Energy Corp. GPOR, -2.45% 63% 33% 4% $12.65 $19.21 52%
Energy Transfer Partners LP ETP, -1.68% 71% 29% 0% $16.62 $24.70 49%
Consol Coal Resources LP CCR, -2.19% 67% 33% 0% $13.70 $19.67 44%
Helix Energy Solutions Group Inc. HLX, -4.21% 75% 25% 0% $6.65 $9.41 41%
QEP Resources Inc. QEP, -4.60% 64% 36% 0% $9.56 $13.48 41%
PDC Energy Inc. PDCE, -3.42% 72% 28% 0% $43.04 $60.13 40%
Nabors Industries Ltd. NBR, -4.34% 66% 34% 0% $6.22 $8.61 38%
Callon Petroleum Co. CPE, -5.36% 92% 8% 0% $11.37 $15.69 38%
Carrizo Oil & Gas Co. CRZO, -4.58% 68% 28% 4% $19.66 $27.02 37%
Antero Midstream Partners LP AM, -0.74% 100% 0% 0% $28.49 $39.00 37%
SRC Energy Inc. SRC, -0.72% 85% 15% 0% $8.74 $11.79 35%
Source: FactSet

You can click on the tickers for more information about each company, including news, charts, price ratios, financials and filings.

If you believe oil prices will continue to recover and are interested in picking individual stocks and see any interesting names here, your next step should be to do your own research so that you can carefully consider each company’s long-term prospects, hopefully with the assistance of your investment adviser.

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