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

<a href="">Philip van Doorn</a>

Wall Street sees gains of 35% to 137% for 15 companies

BloombergAnalysts expect shares of Halliburton to rise 20% over the next 12 months.DMAMBMCMDMEMGPREVIEWZBZBRZDZDRZFZGZQZRZSZTZU

(Correction: Goldman Sachs raised its 2018 price target for West Texas Intermediate crude oil to $57.50, not $62.)

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 (EverFuture:CL1) 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 $57.50 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:

CompanyTickerMarket capitalization ($mil)Total return - 2017 through Dec. 5Exxon Mobil Corp.(XOM)$351,214-5%Chevron Corp.(CVX)$228,6666%Schlumberger N.V.(SLB)$87,895-22%ConocoPhillips(COP)$61,2464%EOG Resources Inc.(EOG)$58,3420%Occidental Petroleum Corp.(OXY)$53,5672%Phillips 66(PSX)$50,26618%Kinder Morgan Inc. Class P(KMI)$38,278-15%Halliburton Co.(HAL)$38,069-18%Valero Energy Corp.(VLO)$37,53631%Source: FactSet

Here’s how analysts view these big names:

CompanyTickerShare ‘buy’ ratingsShare neutral ratingsShare ‘sell’ ratingsClosing price - Dec. 5Consensus price targetimplied 12-month upside potentialExxon Mobil Corp.(XOM)29%46%25%$82.89$83.961%Chevron Corp.(CVX)64%32%4%$120.39$124.333%Schlumberger N.V.(SLB)69%31%0%$63.45$74.3817%ConocoPhillips(COP)70%30%0%$51.23$56.3510%EOG Resources Inc.(EOG)58%42%0%$100.90$109.979%Occidental Petroleum Corp.(OXY)31%61%8%$70.00$67.65-3%Phillips 66(PSX)38%52%10%$98.27$96.67-2%Kinder Morgan Inc. Class P(KMI)57%43%0%$17.14$23.1135%Halliburton Co.(HAL)84%13%3%$43.63$52.1920%Valero Energy Corp.(VLO)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 (^GSPC), the S&P 400 Mid-Cap Index (ARCX:MID) and the S&P Small-Cap 600 index (:SML). 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:

CompanyTickerShare ‘buy’ ratingsShare neutral ratingsShare ‘sell’ ratingsClosing price - Dec. 5Consensus price targetimplied 12-month upside potentialContango Oil & Gas Co.(MCF)62%38%0%$2.62$6.21137%Range Resources Corp.(RRC)68%29%3%$17.28$28.5965%Green Plains Inc.(GPRE)100%0%0%$16.50$26.1158%Sanchez Midstream Partners LP(SNMP)80%20%0%$10.40$15.8853%Gulfport Energy Corp.(GPOR)63%33%4%$12.65$19.2152%Energy Transfer Partners LP(ETP)71%29%0%$16.62$24.7049%Consol Coal Resources LP(CCR)67%33%0%$13.70$19.6744%Helix Energy Solutions Group Inc.(HLX)75%25%0%$6.65$9.4141%QEP Resources Inc.(QEP)64%36%0%$9.56$13.4841%PDC Energy Inc.(PDCE)72%28%0%$43.04$60.1340%Nabors Industries Ltd.(NBR)66%34%0%$6.22$8.6138%Callon Petroleum Co.(CPE)92%8%0%$11.37$15.6938%Carrizo Oil & Gas Co.(CRZO)68%28%4%$19.66$27.0237%Antero Midstream Partners LP(AM)100%0%0%$28.49$39.0037%SRC Energy Inc.(SRC)85%15%0%$8.74$11.7935%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.

Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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