NEW YORK (The Deal) -- If Warren Buffett is right that investors should be fearful when others are greedy and greedy when others are fearful, it's time to be greedy -- at least with oil and gas stocks. Two big oilfield services mergers are creating perhaps the best bets.
Last week, oil prices fell to less than $40 per barrel, falling further on Monday with the stock market rout. On Wednesday, West Texas Intermediate crude was trading at around $38.76, the lowest in six years. On Thursday morning, it was peaking just over $40 again. However, oil prices are still down around 60% since last summer and about 35% since mid-June.
The most recent oil price slide, and subsequent gyrations, have sent a lot of investors running for cover and led industry watchers to identify companies most likely to make it through to the other side. The names could be a good entry point for an eventual recovery.
Tudor, Pickering, Holt & Co. Securities offered nine names on Monday as the stock market cratered. It's a balanced list of large and small oil and gas explorers: Anadarko Petroleum (APC) - Get Anadarko Petroleum Corporation Report , Concho Resources (CXO) - Get Concho Resources Inc. Report , EOG Resources (EOG) - Get EOG Resources, Inc. (EOG) Report , Diamondback Energy (FANG) - Get Diamondback Energy, Inc. Report , Gulfport Energy (GPOR) - Get Gulfport Energy Corporation Report , Memorial Resource Development (MRD) , Noble Energy (NBL) - Get Noble Energy, Inc. (NBL) Report , Newfield Exploration (NFX) and Cimarex Energy (XEC) - Get Cimarex Energy Co. Report .
After the subsequent whipsawing of the stock market, TPH recommended on Thursday to focus on large, well-capitalized companies, noting Anadarko and EOG as well as Schlumberger (SLB) - Get Schlumberger NV Report , Baker Hughes (BHI) -Halliburton (HAL) - Get Halliburton Company (HAL) Report , Valero Energy (VLO) - Get Valero Energy Corporation Report , Energy Transfer Equity (ETE) and Royal Dutch Shell (RDS.A) .
On Monday, Topeka Capital Markets' Gabriele Sorbara offered up his list, which included Diamondback but also Energen (EGN) , Pioneer Natural Resources (PXD) - Get Pioneer Natural Resources Company Report and Cabot Oil & Gas (COG) - Get Cabot Oil & Gas Corporation Report .
Energen is Sorbara's top pick given its properties in the core of the Permian Basin and its "underleveraged" balance sheet, which would allow the company to be one of the first to "re-accelerate as the environment recalibrates." He expects as oil prices improve to $60 to $65 per barrel the company could see production growth of 17.5%.
Energen also has 91,000 net acres in the Mancos oil play in the San Juan Basin, which it recently began testing. He noted that the company trades at a significant discount to its Permian peers. It's been mentioned as a potential takeover target for a larger company wanting to enter or expand its portfolio in the Permian.
Cabot is Sorbara's top pick for natural gas given that it is the lowest-cost producer in the Marcellus shale in northeast Pennsylvania with around 200,000 net acres. He said recent concerns and push back have centered around the takeaway bottlenecks in the region, which are impacting pricing and constraining production growth.
But he's positive given progress being made on the Constitution pipeline, which recently received a final order from federal regulators to begin construction and hopes to get its permit from New York state regulators this month. If that happens, the pipeline could be in service in the second half of next year, he said.
With other capacity expected in the coming years that could lead to around 70% of Cabot's natural gas leaving Appalachia, the company should garner investor excitement around 2017 beyond production and cash flow growth and improved pricing, Sorbara said. He also said that he thinks Cabot and other natural gas companies could "catch a bid" as the industry exits the "shoulder season," the time between summer and winter when there's less demand for natural gas.
Jason Gammel, who covers integrated oil companies for Jefferies & Co., released his list late last week, which includes Chevron (CVX) - Get Chevron Corporation Report , Occidental Petroleum (OXY) - Get Occidental Petroleum Corporation Report and Marathon Oil (MRO) - Get Marathon Oil Corporation (MRO) Report in the U.S. and Galp Energia (GLPEF) and BG Groupundefined , which is being bought by Shell, in the European Union.
In oil services, RBC Capital Markets analyst Kurt Hallead on Tuesday recommended Schlumberger, Baker Hughes and Cameron International (CAM) as outperformers whether oil is at $35, $50 or $70. Nice call on Cameron: On Wednesday, it announced that it was being taken out by Schlumberger for $66.36 per share, or $14.8 billion, a 56% premium over Tuesday's close. It jumped 41% that day to almost $60.
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