Investor focus remains fixed on companies with oil leverage, a strong balance sheet, near-term catalysts and strong upside potential, says Neal Dingmann.

The reason? "We still believe natural gas prices could be weak over the next year or two, while oil prices could remain range-bound near $75—meaning each barrel of oil is far more economic than its natural gas equivalent," the Wunderlich Securities analyst explained in a Sept. 23 research note.

Some of Wunderlich's "favorite" oil-focused E&Ps include Clayton Williams Energy Inc., Midland, Texas, (Nasdaq: CWEI), Swift Energy Co., Houston, (NYSE: SFY) and Rex Energy Corp., State College, Pa., (Nasdaq: REXX), to name a few.

In 2010, all three oil producers unveiled plans to ramp up efforts in key North American shale plays rife with upside potential by increasing capex to accelerate its Permian activity (Clayton), by securing new Eagle Ford capacity and extending its rig contracts (Swift) and by betting its chips on the emerging Niobrara, while cushioned by the Marcellus (Rex).

Below is Wunderlich's take on its oily movers and shakers:

Gulfport Energy Corp., Oklahoma City, (Nasdaq: GPOR) has "a nice cash cow in South Louisiana to fuel its Permian and Niobrara activity," Dingmann says. Additionally, its Canadian oil-sands play "keeps moving forward." Wunderlich has a Buy rating on Gulfport, with an $11.68 price target.

Clayton Williams remains an undervalued Permian player with potential Eagle Ford upside, according to Dingmann. "Since transitioning to a developmental, oil-focused E&P in mid-2009, the company has generated strong results from its Permian and Austin Chalk areas," the analyst says. Clayton, which holds approximately 133,000 net acres in the Eagle Ford oil window, is in the play "on the cheap," he adds. Wunderlich has a Buy rating on Clayton, with a $49.51 price target.

GeoResources Inc., Houston, (Nasdaq: GEOI) and Denver-based Resolute Energy Corp. (NYSE: REN)are Bakken players that "shouldn't be overlooked for long," Dingmann contends. In less than three years, GeoResources has tripled its production and reserves, and has also expanded its acreage positions and drilling inventory.

In July, the company's president and chief executive Frank Lodzinski confirmed that the company was narrowing its focus on drilling for oil and liquids, primarily in the Bakken trend of the Williston Basin. Resolute also believes its Bakken activities will expose the company to meaningful near-term growth in both reserves and production, chief executive Nicholas J. Sutton said in an Aug. 25 press release announcing the company's joint venture with Marathon Oil Corp., Houston, (NYSE: MRO) to develop approximately 19,000 gross acres in McKenzie County, North Dakota.

"We like the fact that both companies have strong production, cash flows and balance sheets that can easily fund an aggressive drilling program in the Bakken," Dingmann says. Wunderlich has a Buy rating on both companies, with a $14.83 price target on GeoResources and a $10.77 price target on Resolute.

In South Texas, Swift Energy "should see strong production and reserve increases from its Eagle Ford and Olmos assets," where the company is currently running three rigs. "We also like the Lake Washington play in South Louisiana as it adds nearly 10,000 barrels of oil equivalent per day (predominantly oil), which throws off significant cash that Swift can use to further develop its Eagle Ford assets," Dingmann added. The firm has a Buy rating on Swift, with an $11.21 price target.

Wunderlich also anticipates "big production gains" from Rex Energy through 2011 and sees its position in the emerging Niobrara as a "nice oily upside." The firm has a Buy rating on the company, with an $11.21 price target.

Dingmann also notes that the company's recent gas-focused joint venture in Pennsylvania with Summit Discovery Resources II LLC, a subsidiary of Sumitomo Corp., Tokyo, (Tokyo: 8053), "shows the value of the company's Marcellus play," the cash flow of which will provide a stable base for Rex in other plays such as the oily Niobrara.

In August, Rex reported that Sumitomo planned to fund 80% of its remaining drilling and completion costs until the $52-million drilling carry was fully utilized. The assets included in the JV comprise 12,900 net acres, certain producing Marcellus shale wells and associated midstream assets, with Rex retaining operatorship. Dingmann places the value at $8,000 to $10,000 per acre on the play.

"Using these figures on Rex's remaining Marcellus acreage position would create a value higher than the company's current market capitalization," making its current Niobrara potential "essentially free," the analyst said.

Meanwhile, Alaska-focused E&P company Miller Petroleum Inc. (d/b/a Miller Energy Resources), Huntsville, Tenn., (OTCBB: MILL) has "done a good job of bringing on previously shut-in wells, and is in the market for a reserve-based credit facility to fund its growth initiative," Dingmann said. The company has "seen nice production increases from its Alaska assets," and Wunderlich anticipates an additional boost in its production and reserves once it obtains the necessary capital. The firm has a Buy rating on Miller, with a $4.73 price target.

Rounding off the oily E&P group, Dingmann notes that Wunderlich is also closely tracking Abraxas Petroleum Corp., San Antonio, (Nasdaq: AXAS), Billings, Mont.-based Voyager Oil & Gas Inc. (OTCBB: VYOG), Magnum Hunter Resources Corp., Houston, (Amex: MHR) and Houston-based Evolution Petroleum Corp. (NYSE Amex: EPM).