5 Top Energy Stocks From Goldman Sachs

BOSTON (TheStreet) -- Energy stocks have been bruised and battered over the past three months, but Goldman Sachs (GS) remains firm on its outlook for five stocks in the industry.

Energy shares have risen and fallen on international and political extremes. In the latest unpredictable event, the International Energy Agency last week said it will release oil reserves to increase supplies, which sent down the price of crude by 8% over two days in London trading.

Energy stocks are down 8.5% over the past three months but have a 4% gain this year, according to Morningstar. Investors have unloaded riskier assets, such as energy, technology and securities in emerging markets, as global economic growth slowed and the U.S. central bank ended its bond-buying stimulus program.

Just yesterday, the Conference Board's sentiment index said U.S. consumer confidence fell to a seven-month low in June on worries about high unemployment and a sluggish housing market.

Still, the central bank has said the economy faces only a temporary slowdown in economic growth. That view is shared by others, including Goldman Sachs rival Morgan Stanley. To be sure, Goldman Sachs said last week the International Energy Agency's plan to release 60 million barrels of oil by the end of July prompted it to lower its three-month Brent crude price target by $10 to $12 a barrel to $105 to $107 a barrel.

Here are Goldman Sachs' energy stock picks for 2011:

Cabot Oil & Gas ( COG) is an independent oil and gas producer with operations in the North America.

In an April 28 research note, Goldman analysts said investors have yet to grasp that Cabot "could repeat 30%-50% production growth again in 2012" while spending within cash flow from its participation in other oil shale operations.

Goldman has a $67 price target on its shares. Its shares are up 23% this year and 62% over the past 12 months.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Diamond Offshore Drilling ( DO) is an offshore contract oil and natural gas driller with 46 rigs worldwide.

Goldman Sachs says the company should benefit from "a steadily improving mid-water market and a tightening deepwater market to drive outperformance. We see 17% upside to our $85 six-month net-asset-value-based price target, plus a 4.8% annual dividend yield.

"Diamond is highly leveraged to the mid-water market, which is, in turn, highly leveraged to oil prices, and we believe this is underestimated," said the firm's most recent analysts' report.

Its shares are up 3.9% this year and 19% over the past 12 months.


First Solar ( FSLR) makes solar modules and systems. Its shares are down 10% this year and 0.3% over the past 12 months. It has a market value of $10 billion. It's a volatile stock. Shares topped at $175. 45 early this year and are now at $116.

Goldman Sachs has a $190 share price target on it. It says: "We reiterate our conviction-list-buy rating on (its) shares, with 41% upside to our unchanged $190 price target."

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Hornbeck Offshore Services ( HOS) is a provider of offshore supply vessel fleets, which it uses to transport goods and supplies to and from offshore rigs and platforms, primarily in the Gulf of Mexico. It also has a large fleet of tug and tank barges, which mostly transport petroleum.

Hornbeck shares have a market value of $654 million and are up 20% this year and 60% over the past 12 months.

Goldman Sachs said in a June 22 analysts report that if the oil industry's Gulf of Mexico recovery takes "longer than expected, Hornbeck has an option to reallocate more vessels to foreign markets such as Brazil and Mexico until demand in the U.S. Gulf strengthens."


Plains Exploration and Production ( PXP) remains a strong buy from Goldman Sachs, which says the company has Gulf of Mexico deepwater assets that are relatively untapped and that rising oil prices will boost earnings significantly.

Plains Exploration is an independent North American oil-and-gas company producing natural gas and oil. About 50% of its production is weighted toward oil.

Shares of the $5 billion company are up 8% this year and 64% over the past 12 months.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

>>To see these stocks in action, visit the 5 Top Energy Stocks From Goldman Sachs portfolio on Stockpickr.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

More from Personal Finance

How to Be a Winner Like Legendary Former General Electric CEO Jack Welch

How to Be a Winner Like Legendary Former General Electric CEO Jack Welch

Best U.S. Cities for New College Grads

Best U.S. Cities for New College Grads

33 Pictures of the Drastic and Deadly Impacts of Climate Change

33 Pictures of the Drastic and Deadly Impacts of Climate Change

30 Mind-Blowing Concept Cars and Cars of the Future We Want to See Built

30 Mind-Blowing Concept Cars and Cars of the Future We Want to See Built

All 2018 Graduates Must Watch Jim Cramer's Bucknell Commencement Speech

All 2018 Graduates Must Watch Jim Cramer's Bucknell Commencement Speech