The 1986 oil crash wasn’t an event to miss. But is this event going to take place again given that just last year, oil prices dropped 50% and then tumbled over to $12 per barrel after $30. A report from Jeffries states that just in 18 months, nearly 25% of exploration and production firms went out of business. This may raise a red flag for investors.
To keep things basic, the problems was primarily too much debt and not enough reserves. Some of the companies that Jefferies used in its analysis are mentioned below given the situation in which they can outrun this oil crisis.
The first one in the list is the top energy competitor Concho Resources Inc. (NYSE:CXO) based in West Texas. The company focuses on exploration and development. It was able to complete a secondary stock offering which was completely successful as it rose over $1 billion. Concho Resources Inc. (NYSE:CXO) aims at using the proceeds from this stock offering to repay its debt under its credit facility and pay for financing its very own three year growth plan. Jefferies price target for Concho Resources Inc. (NYSE:CXO) stock amounts to $133. The consensus prices target of Thomson/First call $119.04, and at Wednesday, shares closed at $118.26.
The second in line is Devon Energy Corp. (NYSE:DVN) which is estimated to have over 48% of its 2015 production to be in natural gas. The company drills primarily in the U.S with over 70% of its reserves in the U.S. it wishes to invest more than $1.1 billion in the Eagle Ford shale as well as drill over 200 wells. Devon Energy Corp (NYSE:DVN) has a daily production less than 2 billion in cubic feet. Investors of Devon Energy Corp (NYSE:DVN) are paid 1.4% in dividends. The price target stated by Jefferies is $74 while its consensus target in price is less than $69.52. The shares of Devon closed at $63.95 on Wednesday.
Pioneer Natural Resources Co. (NYSE:PXD) proved to be a story of success for the last five years. It owns over 20,000 locations in the Midland Basin as well as its own frac fleets. The company is a low cost and high margin company with low prices for the time being. Investors are paid a low dividend; 0.05%. The price target set by Jefferies is $193, with the consensus estimate at $171. The stock closed at $156.95 on Wednesday.
Another leading stock is Range Resources Corp. (NYSE:RRC) which works with undeveloped and developed natural gas as well as oil leases in the southwestern parts of America and the Appalachian. The company owns wells amounting to 4,637 with nearly 1.6 million gross acres leased in its Appalachian region. On the other hand, its Southwestern region owns It 1,536 wells with nearly 811,000 gross acres leased in its Southwestern region. Investors are paid a 0.3% dividend. Price target of Jefferies is $59 with consensus at $69.97. It closed at $51.89 on Wednesday.
