Amid a persisting commodity downturn, the move over the past few years for a majority of mid- and large-cap oil and natural gas producers has been to make strategic bets in the low-cost Permian Basin of west Texas.
And for some oil producers, those bets may be getting closer to paying off big, according to analysts.
SunTrust Robinson Humphrey analysts noted Monday that EOG Resources (EOG - Get Report) recently reported to the Texas Railroad Commission a big well in Loving County in the Delaware Basin, a subformation of the Permian.
The well ranks as one of the best SunTrust has ever seen in the Delaware, the analyst said Monday, adding that it could easily impact other companies drilling in the region which have also been named as potential buys by other firms.
Among those names, Concho is certainly the Street's favorite, but WPX Energy is perhaps the most likely to feel the residual effects of EOG's successful well.
The acreage WPX picked up from RKI Exploration & Production in August 2015 is near to EOG's Loving County assets, albeit further to the northwest and nearer to the New Mexico border. WPX also bolted on acreage in Texas' Loving, Reeves, Ward and Winkler counties in January in a $775 million deal that did not sit well with the market.
WPX could certainly use a win from its own Delaware assets as its shares are down nearly 7% since it announced the bolt-on in mid-January.
Another producer with recently acquired Loving County acreage near to that of EOG's assets is RSP Permian (RSPP) .
Coincidentally, Goldman Sachs analyst John Nelson upgraded RSP Permian to Buy this week and raised his price target for the shares to $63 from $41.
Nelson pointed to the company's acquisition of privately held Silver Hill's core Delaware Basin assets, which are located in Loving County to the northeast of those owned by EOG, as a key advantage for this Permian player. RSP Permian paid $2.4 billion, or around $47,000 per acre, in October for the assets, a price tag some analysts hailed as the new high watermark for transactions in the Delaware Basin.
"While investors focused initially on the high water mark RSPP made in the implied dollar per acre price paid for Silver Hill, we note the acreage abuts EOG's Loving County position where 90 day, lateral length adjusted oil rates are [about 2 times] the Delaware Basin average and significant stacked pay upside remains," Nelson wrote.
Meanwhile, crossing over the southern Loving County border into northern Reeves County, another Delaware Basin hotspot, is acreage held by Cimarex Energy (XEC - Get Report) and Resolute Energy (REN) .
Stifel Financial analyst wrote Tuesday that Cimarex is among the large-cap stocks in its coverage that it expects expects the strongest growth this year.
"Improved returns based on lower well costs and in some cases stronger balances sheets bolstered by capital infusions and non-core asset sales have positioned most companies to return to growth mode this year," the industry followers wrote.