British poet Alfred Lord Tennyson soothed the brokenhearted with his verse, “Tis better to have loved and lost than never to have loved at all,” but modern-day lovers of E&P stocks may just wish they had left their hearts—and wallets—at home over the past year, as the EPX plunged 42%. Yet hope springs eternal, and love is in the air again as the price of oil appears to have stabilized with an upward trend. Public investors are rushing back into the energy space anticipating capturing an E&P’s heart on the rebound.

But just because a company is strong doesn’t mean it holds valuation upside, and just because it appears weak doesn’t mean it’s out of bounds.

The question remains: Who’s hitched, who’s jilted, and who’s got a heart of gold in this uncertain marketplace of energy equities? Oil and Gas Investor reached out to upstream E&P sellside analysts to find which lonely stocks promise golden returns.

A changed environment

How should investors look at valuing E&P stocks in the current economic environment? Differently than before the downturn, said Tim Rezvan, Sterne Agee CRT’s managing director of energy research in New York. “It’s been a growth-driven market, and investors have rewarded companies that have been exploiters of assets. But for the time being, there needs to be a change in focus toward efficiencies and balance sheet strength. Companies have to optimize the exploitation that’s underway.”

Rezvan said he is seeing investors that are late to the rally already, buying perceived quality names indiscriminately, believing those will be most resilient, without looking to valuation. “I don’t think that’s a proper choice,” he said. “You’ve got to find companies that offer asset quality as well as other attractive attributes. When you marry asset quality with a reasonable relative valuation, we think that is a good recipe for success.”

The haves and have-nots today are differentiated by acreage quality, said Rezvan. “We look at where we think asset quality is not being appropriately valued by investors.” Also, “we look for catalysts that we believe the market is not appropriately factoring in.”

Welles Fitzpatrick, partner and senior analyst for New Orleans-based Johnson Rice & Co., agreed that the historic growth premium has given way to an asset quality premium.

“Folks are more concerned about returns on capital than on growth.” That makes sense, he said, because “in a lower commodity price environment, everybody wants to protect their balance sheet more than they have that burning desire to have more and more production, especially when the economics of some basins are in question.”

Gabriele Sorbara, vice president of E&P for Topeka Capital Markets in New York, believes choosing stocks with upside will require a different lens in today’s environment. “The top picks are going to be the higher-quality, more stable names, the companies with strong balance sheets, and with running room in tier one assets.”

Topeka projects a $65 to $75/bbl oil price environment for the next 12 to 18 months; gas around $3 to $4/Mcf. Thus, “we think low beta, high quality is the place to be.”

Companies that are driving down costs—not just because service companies are giving discounts, but through efficiencies such as drilling faster, optimizing completions and improving capital structures—are the companies that will outperform this year, he said. “It’s those companies that are high-grading, enhancing completions, and improving well productivity that will get re-rated and will outperform.”

Jason Wangler, managing director for Houston firm Wunderlich Securities, said the companies he likes have good assets, have a balance sheet that is well managed through this downturn and, most importantly, keep production at least flat or trending slightly higher. “At some point, when the cycle does turn, fighting declines is going to be a difficult thing for a lot of companies, and avoiding that is important.”

Differentiating winners

Wangler’s colleague Irene Haas, Wunderlich Securities managing director, sees positive signs of an improvement in the macro, but she warns investors not to wait until all the good signs of incremental improvement are in front of them. “It would be too late; the sector will have taken off.”

In Haas’ mind, companies fall into either of two camps in today’s world. First are the companies with strong balance sheets, that have strong margins, and are capable of taking a beating in bad conditions. “Investors gravitate to them; their multiple is strong and many have retraced to their 52-week highs.”

On the other end are companies with poor margins, likely caught in a transition between exploration and development, that levered up their balance sheets and now trade at distressed multiples. “Investors are afraid to step in,” she said. “Even in a stronger environment, say $60 to $70, many of these still can’t survive and are hemorrhaging internally and having to do severe cuts. They’re burning furniture.”

Tim Rezvan, Sterne Agee

“When you marry asset quality with a reasonable relative valuation, we think that is a good recipe for success,” said Tim Rezvan, Sterne Agee CRT’s managing director of energy research in New York.

Which explains why she places her bets on the former camp, although those companies may on the surface appear fully valued by popular metrics.

“If you consider their ability to generate organic growth, the quality of their assets, how they have handled their balance sheets, and how much they have in the backlog, they will have a lot of headroom to grow.”

Basing stock picks simply on commodity price forecasts can be a crap shoot, said Jeff Grampp, senior research analyst for Minneapolis-based Northland Capital Markets. Instead, he places high value on leadership at the helm. “Our view is to find a management team that has been in this environment before, who has top-notch assets, and a way to manage through this environment without needing a higher commodity price to excel. We want to have comfort with management because, at the end of the day, those are the guys who are going to be driving the decisions.”

Grampp shies away from management that signals it can grow out of leverage issues. “That strategy is not going to work in today’s environment.” And while he doesn’t rule out investing in a debt-levered company, he instead gravitates to those companies that are willing to make a hard decision to pare off an asset that worked a year ago, “but probably needs to go in today’s environment and would allow the company to consolidate to a more core asset.”

So, with that framework, which U.S. E&P stocks today do these wise stock pickers believe have upside valuation over the upcoming 12 months, and why?

The Permians

Energen Corp. last year sold its utility business and refocused as an E&P exclusively, with assets in the Permian and San Juan basins. Yet, it still trades at a nearly two-turn discount to Permian peers at 7.8x EV/EBITDA for 2016 compared with the group at 9.5x, a clear sign that it is still not fully appreciated by the Street, said Topeka Capital’s Sorbara.

“They’re still perceived as more of a conservative, utility-minded management, and that’s one reason it trades at a discount.” But if you look at what the company’s done over the past year or two, he noted, “they blew away investors’ expectations. They’ve executed on many fronts, sold assets at valuations ahead of expectations, which improved the balance sheet and allows for re-acceleration. They’ve been quick to pivot to test new zones, and they’ve put out some of the best results in the Permian Basin. That overhang should go away.”

In addition to the existing discount, Sorbara foresees three catalysts that portend to drive the Birmingham, Alabama-based Energen even higher.

First, it is transitioning Midland Basin drilling to the Lower Spraberry zone in the Northern Midland Basin, and its first two wells are tracking 900,000 and 1.2 MMbbl EURs—better than the Wolfcamp horizons, and with a much flatter decline rate. “We think this is the most efficient zone in the Midland Basin, and as activity transitions, you should see production benefit and margins improve, ahead of investor expectations.”

Second, Energen should start seeing results late in the year in the Mancos oil play, with a rig that started in May. “If they crack the code up there, that could be a $20-plus asset to the company, and nothing is ascribed to the stock now.”

Finally, the company holds a more than 100,000-acre position in the Delaware Basin that is receiving little credit in shares, he said. Maybe a joint venture could be announced to accelerate the value of this underappreciated asset, he surmised.

Sorbara places a Buy rating on Energen with a $92 price target. “This company can accelerate in this environment—they have the balance sheet.”

Energen likewise captures the attention of Sterne Agee CRT’s Rezvan, for many of the same reasons. “Energen is a stock I really like,” he said. He agrees with the investor overhang related to its recently divested utility segment, but also pointed out Energen has been slower to transition its drilling to more productive zones, and has had issues with meeting guidance in the past. “There has been some concern from investors on the company’s ability to execute, but that is behind them now,” he said.

Rezvan likes Energen’s underlevered balance sheet, due to the utility segment sale and the disposition of mature San Juan Basin gas production, its 170,000 acres in the Permian Basin, and the company’s ability to drive down well costs, giving it the ability to deliver more growth in its stated budget. Even still, the stock lags more richly valued peers like Pioneer Natural Resources and Diamondback Energy by 5 to 6x on an EV/EBITDA basis. “That’s unwarranted, given the company’s comparable asset quality.”

Rezvan puts a Buy on Energen with an $84 target. Energen has delivered “a clear and coherent growth message to its investors,” he said. “We think that is going to resonate.”

While Northland Capital’s Grampp admits that Matador Resources’ stock has been a great performer over time, neither punished nor significantly misunderstood by investors, the upswing is far, far from over, he believes. “They’re in what we view as one of the most exciting, emerging unconventional areas in the onshore United States, the Delaware Basin.”

With results on only about 15 wells on its 50,000-plus net acre core leasehold in the basin, and nearly 1,500 drilling locations in view, “there’s huge upside in terms of drilling inventory,” Grampp said. Add to that an expectation of some 10 potential target zones, which Matador will have tested by year-end, and “we’re excited about a number of different horizons on Matador’s acreage.”

Further, Matador recently acquired Harvey E. Yates Co., with 18,000 net acres in the northern Delaware, largely undrilled horizontally. “We’re not allocating any upside to that asset at the moment,” he said.

Welles Fitzpatrick, Johnson Rice & Co.

Today, “folks are more concerned about returns on capital than on growth,” said Welles Fitzpatrick, partner and senior analyst for Johnson Rice & Co.

Not a small part of Grampp’s rating is due to his confidence in management, referencing his preference for weathered captains that can navigate a storm. “We view this as one of the top management teams with one of the best balance sheets.”

Smaller than some peers, Matador exhibits a higher exposure on a relative basis to the Delaware. “They’re one of the highest ranking E&Ps on a net acre per market cap basis in the Delaware Basin, especially within the stronger balance sheet names, giving more bang for your buck,” he said. “We don’t think they’re getting full credit for their opportunity in the Delaware—that’s really the value proposition over the medium to long term with a name like Matador.”

Grampp bestows an Outperform rating on Matador, with a $32 target.

Likewise, Wunderlich’s Haas puts a firm stamp of approval on Matador, also referencing all-star management. “I don’t think the Street fully differentiates how bright this team is.” She noted the company turned a Delaware project from exploration to development in 15 months in a complicated geological region. “That’s hard to do. This business is about cycle time, payback and strong margins. Matador has not dropped the ball once.” Her view of the Heyco purchase? “They’re just beginning to discover what’s there.” Her call on Matador is a Buy targeting $36.

Gabriele Sorbara, Topeka Capital Markets

“It’s those companies that are high-grading, enhancing completions and improving well productivity that will get re-rated and will outperform,” said Gabriele Sorbara, vice president of E&P for Topeka Capital Markets in New York.

The Niobrarans

The self-described “cash flow junkies” management team at Synergy Resources Corp. are contrarian, “and that’s what I love about them,” exuded Haas. They built their company during 2009, “the last blood bath we had to live through, and they thrived in that environment,” securing a rig and leases at a discount. Having operated in Wattenberg Field for a long time, the only reason they reluctantly took Synergy public was because of the cost of horizontal drilling, she said.

That necessity opened a tremendous window of opportunity for investors, she believes. Synergy now holds 36,000 core acres in Wattenberg, another 41,000 in the northeast extension, and has grown production organically by 100% year-over-year with zero net debt on the books—and still flies under the radar.

“We’ve been supporters of Synergy as it is unique in its ability to bootstrap from zero production in 2009 to 8,000 boe/d today without stressing the balance sheet. They are extremely conscientious as to payback time, because the shorter the payback time, the rest is all gravy.”

The company tends to get overlooked because it is smaller than peers and, oddly, because of its August fiscal year. “It deters some interest,” said Haas.

Driving well costs below $3 million in some cases, the Platteville, Colorado, company expects to have 40 additional wells online by August, and the reserves update at its next reporting “should be spectacular,” said Haas. “We expect more reserves addition coming up even if only a portion of the wells make it on the books.”

Another looming catalyst: an upcoming test of the Greenhorn Formation in the northeast extension acreage could establish a new horizontal play. “If these wells are successful, we could see one more productive interval opening up in this very prolific basin. That’s all upside.”

Haas rates Synergy with a Buy and $16 price target.

“We expect we could revise our NAV upward with the next reserves update. Certainly, they are one of the strongest names. You need to invest in them.”

Johnson Rice’s Fitzpatrick nominates Synergy too. “They shine on balance sheet, on growth, on costs, and on the amount of dry powder they have.” He noted Synergy’s 2015 cash flow per share is growing 6% year-over-year, contrasted against the Niobrara group down 33% and overall E&Ps minus 42%. Moreover, it has no debt and $217 million liquidity. “For their size, that’s a massive, massive amount.” And with a history of buying good acreage at good prices, he counts that “a solid opportunity.”

Fitzpatrick deems Synergy a Buy with a risked NAV of $18.

Similarly, Fitzpatrick is high on the Niobrara in his top picks, also rating Denver-based PDC Energy as a stock to watch.

“Where PDC really shines is its cash flow per share growth,” he highlighted. “They’re growing cash flow per share by 26% year-over-year. Needless to say, that’s in a disaster of a commodity environment year-over-year, and that’s with hedges rolling off. It’s quite an achievement, perhaps the best or close throughout all the companies we cover.”

Nonetheless, PDC looks cheap at 6.6x EV/EBITDA vs. the Niobrara group at 10.5x and the E&P group at 8.7x. The company also has a light debt load at 1.2x debt/EBITDA, vs. 2.5x and 3.7x against Niobrara and E&P comparables.

Besides an attractive valuation, new completion techniques might prove a near-term catalyst. The company is testing plug-and-perf completions, along with employing the Biovert technique, a diverting agent, resulting in a 20% uplift against type curves in recent well tests. “Both of these techniques have relatively negligible costs, but even without them the company should be able to put up 25% year-over-year growth into the foreseeable future. It’s well situated.”

And line pressure relief from the DCP Lucerne II gas plant that started up in May should give a boost to production, an uplift that positively impacts Synergy as well. “They’ve been artificially choked back by how high these line pressures have been. Investors don’t fully understand the magnitude of how much better it can be. If it ends up 10% to 20% better because of line pressure, that’s a huge difference.”

Fitzpatrick said investors that avoid PDC often point to Utica acreage outside the favored core, but that’s a small part of the story (with a potentially happy ending). “Any time you have a company trading at such a discount despite having such strong growth and a strong balance sheet, something is being missed. In a $60 oil price environment, they’re one of the ones that could see significant uplift as they continue to execute.”

Fitzpatrick has a Buy rating on PDC with a risked NAV of $91.

Wunderlich’s Jason Wangler thinks Bill Barrett Corp. is the overlooked Niobrara little brother. “They’ve got a great Niobrara position” with 50,000 acres, “and have done a good job with extended reach laterals. Frankly, they just haven’t gotten a lot of credit from the market.”

Jason Wangler, managing director for Wunderlich Securities, thinks Bill Barrett Corp. is the overlooked Niobrara little brother.

The company has done a “tremendous job of execution,” easily beating production guidance in first-quarter results and it raised guidance levels for 2015. “Their well results and production have been very strong.” And with “hundreds and hundreds of locations, they’ve got decades of inventory running a one rig program as they are now. Obviously, they want to get after this stuff sooner.”

Compared to peers on cash flow, EBITDA or asset valuations, Barrett is trading at a significant discount, he said. “Investors don’t understand that they’ve already moved the ball forward.”

Wangler gives Bill Barrett a Buy with a $15 price target, even with a 25% discounted multiple to peers, where it has traded historically. “Give them a peer group multiple, and it’s close to $20.”

Picking another Niobrara favorite, Wunderlich’s Haas sees Bonanza Creek Energy Inc. as one of her most attractive names. “The company has done a lot this quarter to lower costs,” she said. “They’ve been aggressive, and that’s encouraging.”

While flying high in the markets in first-half 2014, Bonanza Creek fell out of favor with investors after levering up following an acreage purchase, and due to uncertainty around its vacant CEO position, all in tandem with the fall of oil price. In November, the company plucked its chairman of the board Rich Carty to lead the way, and in January issued $180 million in new equity to right the balance sheet.

“Investors were worried about debt structure and leadership. They’ve got that taken care of.”

Irene Haas, Wunderlich Securities managing director, lists Synergy Resources and Bonanza Creek Energy as two of her favorite names.Paste

Operationally, Bonanza Creek is laser focused on a 70,000 net acre contiguous block in Wattenberg Field, where it is using fewer facilities with an emphasis on pad drilling after four years of delineation. D&C costs have dropped 20% with one-third of savings from lasting efficiency gains. “Few companies have done it across the board on so many categories as Bonanza Creek,” Haas said.

“Right now they are in show-me mode. With each quarter, as they put out better numbers and cost reductions, investors should feel better.”

Haas rates Bonanza Creek as a Buy, with a $35 price target.

“With a production growth rate of 15% for 2015 and debt/EBITDA ratio below 2x, we believe Bonanza Creek is attractively priced as a Wattenberg pure play.”

The Eagle Fordians

SM Energy is an Eagle Ford player that typically trades at a bit of a multiple discount to peers, said Johnson Rice’s Fitzpatrick, “one I don’t think is deserved.” The company is “well- positioned with quality acreage, cheap on a multiple basis, resilient as to cash flows, has one of the better balance sheets, and has a near-term catalyst that I can see putting it into a different class of companies as far as investor impressions,” he said.

The Denver company on 2015 trades at a 5.4x EV/EBITDA, he said, compared with 8.3x for Eagle Ford peers and 8.7x for E&Ps as a whole. On the flip side, it has a lower debt load at 2.3x debt/EBITDA vs. the Eagle Ford group’s 4.4x and the E&P group at 3.7x. “Essentially, everyone in the E&P space is having cash flow per share go down year-over-year, but they are proving more resilient than both the E&P and Eagle Ford groups.”

That aforementioned catalyst is the Upper Eagle Ford Shale. SM and Sanchez Energy are testing the zone, and results look strong, he said. “The Upper Eagle Ford could give them multiple expansion, and certainly more running room in one of the better plays of the Lower 48. As they continue to prove up the concept, and the geographical breadth, they should start to see more credit for the upper in their price.”

With slightly tighter well spacing, and no credit for the Upper Eagle Ford, Fitzpatrick places a Buy rating on SM with a risked NAV of $70 (at $70/bbl oil and $3/Mcf), “and that could still be a couple of turns below the group on the multiple.”

Topeka’s Sorbara doubles down on SM as well. “Cheapest name in the E&P space” on an EBITDA multiple basis, he said. “The group is two turns higher; that’s the call here.” He added the company sees four potential zones in the Eagle Ford, quadrupling its inventory if successful, and has also improved EURs by 35%. “They’re expanding their inventory and EURs, and shares should garner a better valuation. This one’s dirt cheap.” Sorbara’s call on SM is a Buy with a $70 target.

Jeff Grampp likes Carrizo Oil & Gas Inc. with its “very core” Eagle Ford position. The Houston company is an early adopter of stacked/staggered laterals in the Lower Eagle Ford in LaSalle County, Texas, as well as downspacing tests that could go as tight as 330 feet to even 165 feet. “While somewhat speculative and early stage, that kind of downspacing offers potential to effectively double their inventory,” the Northland analyst said.

Moreover, the company holds 20,000 net acres in the Delaware Basin that have yet to attract much drilling capital, which is concentrated in its Eagle Ford assets. “With some well results and a more established drilling program, we could look to go to a more resource-based valuation versus a pure acreage valuation.”

Although Carrizo sports a strong balance sheet, it’s the other plays that may be dragging on the stock, he said. Carrizo’s portfolio includes exposure to the Utica, Marcellus and Niobrara shales as well, which lie in wait. “A lot of investors like pure plays or maybe two basins, so stripping things down, narrowing the asset focus, could get them more of a premium valuation. For example, their Niobrara asset is very economic but a tier two asset to Carrizo; it could be tier one for someone else.”

Yet his higher rating isn’t dependent on finger-crossing for divestitures, Grampp said, only a catalyst for investor sentiment. “The overall asset value supports our price target, if not higher. The majority of their assets have favorable breakevens and value.”

Grampp rates Carrizo an Outperform with a $65 price target.

Even two years following a management change and an epic overhaul of its balance sheet and portfolio resizing, Chesapeake Energy Corp. still doesn’t feel the love, Wunderlich’s Wangler said. “It’s not a stock people are looking at so much—at least not with a kind eye.”

Memories of heart attacks past linger, he said, in which the shale-leading, but highly levered, company had to tap the equity markets in midnight raises to keep the lights on.

But look at what new CEO Doug Lawler has accomplished in his tenure: $3 billion cash on the books from a massive asset sell-down, an undrawn credit facility, an understandable balance sheet, and a $1 billion share buyback program. He’s retained and maximized top-tier assets in the Eagle Ford Shale, the Midcontinent, the Utica Shale and Powder River Basin.

“Doug and his team have done a great job building out a tremendous asset base, and following it with a great financial position and strategic focus on executing those assets. That’s an impressive turnaround in a couple of years.”

The company simply simplified the story, he said. “I don’t think anyone would argue that Chesapeake has always had good assets; it’s just been a function of knowing how to value it all. Now it’s to a point where we can get our arms around it.”

Add to that a multibillion-dollar debt pay down in record time, and investors can finally breathe easier. Chesapeake trades on a 4x to 6x multiple, where peers trade 6x to 8x, he said. “Whether on an EBITDA or cash flow basis, they trade at significant discounts. I like what they’ve done, and they’re not given enough credit for that.”

Wangler rates Chesapeake a Buy with a $24 target.

“Look at what this was a couple of years ago and what it is now, and you see dramatic change. A couple of years ago, there was talk of them going out of business. That’s a big 180, and they haven’t gotten credit for it on the equity side.”

The Appalachians

Appalachia producers continue to hold an equity advantage among gassier names, but three stand out to our analysts.

“I like Gulfport Energy quite a bit,” acknowledges Wangler. “The Utica position has been phenomenal for them. It’s turned out to be about as good as everybody thought it was going to be years ago.” And while many companies are scrounging to make positive returns today, “they’re making 50% rates of return in this market, which is hard to come by. Obviously, more gas than oil, but that may end up being an okay thing in this environment.”

Gulfport also suffered a drop in share price as it struggled up the learning curve the past couple of years and missed guidance targets, but it did “a much better job” last year hitting its numbers, said Wangler. “They had dramatic production growth the last couple of years, but it took longer than people were expecting. They’ve now drilled more wells and understand the play better.”

And those wells are some of the best in the country, he noted. As NGL prices have waned with the price of oil, Gulfport has shifted drilling to the gas phase of the Utica, resulting in impressive rates and equally telling economics.

Jeff Grampp, senior research analyst for Northland Capital Markets, said some investors aren't comfortable with levered names, but to the extent companies can clean up their balance sheet, they can attract a fresh look.

“That’s not understood yet, that these wells are more productive and likely going to be more economic than even the Marcellus wells we’re all looking at being the best of breed. These actually could be the best.”

Further, Wangler believes a largely unrecognized part of Gulfport’s story is its ability to move large volumes of gas out of the basin at reasonable prices compared to peers, combined with aggressive hedging above $3/Mcf over the next two years. “Firm transportation is a huge advantage. They haven’t gotten credit for that.”

Wangler places a Buy rating on Gulfport with a $56 price target.

Another Appalachia E&P poised to prosper per Sterne Agee CRT’s Rezvan is Rice Energy, with holdings in both the Marcellus and Utica plays mirrored across the Pennsylvania-Ohio line.

“While we are cautious on gas, we do believe Rice is drilling the best dry gas wells of anybody in the U.S. today,” he said. “You can make the case that it’s a $2/Mcf breakeven for the wells they’re drilling.”

In addition to the obvious successes, Rice also picked up 22,000 acres in Greene County, Pa., from Chesapeake Energy last year with Marcellus production, in which it is now testing deep Utica prospectivity. “It could be a very big bump to their inventory if they can prove the Utica is going to be as overpressured and prolific as they think it might. We believe there is a lot of gas in place, and we’re not currently reflecting any inventory value from that part of the play in our value for Rice shares.”

Another upside: Rice’s 50% limited partner ownership and 100% general partner ownership in Rice Midstream Partners, a gathering-system IPO carve-out in May. “We believe the share price does not fully reflect the value they have from the midstream assets they own,” said Rezvan. By year-end, the MLP will have 2.5 Bcf/d capacity to move Rice’s and third-party volumes, and Rezvan additionally expects Rice to drop-down its Utica gathering assets, creating not only liquidity for Rice, but increased value in the MLP.

Share-price weakness from a secondary offering by its private-equity backer Natural Gas Partners in May presents a buying opportunity, he said. Rezvan gives Rice a Buy and has a $30 price target.

Marcellus operator Rex Energy has fallen off of many investors’ portfolios due to overleverage and takeaway issues, said Northland’s Jeff Grampp, but “they are an above-average leveraged company” with an economic core asset in Butler County, Pa., he believes. The CEO derives from the financial world, and knows how to right a listing balance sheet.

“They’ve identified a number of noncore assets [for divestiture] that we don’t think represent a lot of long-term upside.” Those include a water service subsidiary that Grampp values around $60- to $80 million, and conventional Illinois Basin assets that could bring in another $100 million or so.

“That’s going to boost their liquidity, de-lever the balance sheet, and get them in a better position to develop their core asset over the longer term. It gives them breathing room.”

In the meantime, Rex has worked out favorable amendments to its credit facility to avoid any triggers to covenants, he said, as well as put in place hedges against swings in the Nymex differential and contracts for firm transportation in 2016 to get gas out of the basin.

From an operational standpoint, Rex steadily revises type curves up, and well costs down. “They’ve done a great job in making this an economic asset, even in today’s environment.”

Major value could blossom from a 200,000-acre purchase from Shell last year, enveloping its Butler County core. “Initial well results should be coming imminently.”

Grampp said many investors aren’t comfortable with levered names, “but to the extent they can clean up the balance sheet, that can attract a new set of investors that maybe wouldn’t take a look today.”

Grampp bestows Rex with an Outperform rating and a $7 target.

The Bakkener

Serving as a proxy for nosediving oil prices, Bakken producers are down 70% over previous highs, trading at a bigger discount to Utica and Permian companies that have more sexiness associated with them, according to Topeka Capital’s Sorbara. Oasis Petroleum has been a victim of that downward ride, he said, and add to that execution hiccups, as Oasis focused on less-efficient areas and deeper Three Forks zones last year, eroding profitablity.

“They’ve been put in the penalty box,” he said.

But Houston-based Oasis is a name that excites Sorbara, which he views as a beat-and-raise story in 2015 driven by its high-grading and enhanced completions.

“Oasis is witnessing a 20% to 40% improvement in early production from the high-intensity completions, and with recent pads showcasing early production of double its type curve. We’re seeing well productivity increase significantly.”

These results are due to the high-volume completions at 50 stages and 9 million pounds of sand. In just two areas where it is testing, Oasis holds 10 years of drilling inventory in its core acreage at its current pace. “Our production and NAV models have an upward bias with the improving EURs,” he said. “They have plenty of running room, and are focusing on their best assets.”

Sorbara values Oasis at 5.2x and 6.2x 2015 and 2016 EV/EBITDA, respectively, vs. peers at 8.6x and 7.4x. “Oasis is moving up our list given the improving asset base and the expanding upside, especially when considering the discounted valuation.”

With the production profile and profit margins improving, along with improving differentials in the region, cash flow and the multiple are due an uplift. “This story should re-rate significantly, and they may have new type curves to talk about later this year. That should get investors excited.”

Sorbara places a Buy rating with a $24 target on Oasis.

Sterne Agee CRT’s Rezvan places his bet on Oasis as well. “It was a massive underperformer in 2014.” An equity raise earlier in the year solved liquidity concerns, and a potential sale of assets forthcoming could raise cash for needed infrastructure buildout on assets purchased in 2013, allowing them to drill ahead there. “We think that is going to prove to be some of their best rock.”

Rezvan likes Oasis with a Buy targeting $25. “The company is going to be justified.”