The asset-rich Permian Basin continues to make energy sector headlines even in 2024. Last year, Exxon Mobil (XOM) and Chevron (CVX) were among the oil majors to ink blockbuster deals in the region, and now Diamondback Energy (FANG) is set to acquire privately owned Endeavor Energy Partners in a cash-and-stock deal worth $26 billion.
The deal will make the newly combined company the third-largest oil and gas producer in the Permian Basin - right behind rival Exxon, which scooped up Pioneer Natural Resources (PXD) in an all-stock deal worth $59.5 billion, and Chevron, which agreed to buy Hess (HES) for $53 billion.
As the region remains the target of serious consolidation and deal-making for energy companies, here's a closer look at two small-cap energy stocks with Permian assets that have notable upside potential, according to Wall Street analysts.
1. Northern Oil and Gas Stock
Northern Oil and Gas (NOG) is an independent energy company involved in the acquisition, exploration, development, and production of natural gas (NGH24) and crude oil (CLH24). The firm's lower-cost business model includes holding non-operating stakes in oil and gas wells that are operated by other producers. With primary operations in the Williston, Permian, and Appalachian basins, NOG has a market cap of $3.42 billion.
The energy company recently announced a dividend of $0.40 per share, an 18% increase YoY. The stock yields 4.69% currently.
Shares of Northern Oil and Gas have gained 4.6% over the past 52 weeks - roughly in line with the performance of the S&P 500 Energy Sector SPDR (XLE).
The company reported its Q4 2023 production update last week, with volumes up 12% sequentially from Q3. For 2024, NOG is targeting roughly 20% annual production growth at the midpoint.
NOG's full Q4 earnings report will be released after the market closes this Thursday, Feb. 22. Analysts are looking for EPS of $1.71, on average.
Northern Oil and Gas stock has a consensus “Moderate Buy” rating from analysts, with the mean price target of $46.96 signifying an upside potential of 40% to current levels. Among the 13 analysts tracking the stock, 9 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 2 have a “Hold” rating, and 1 has a “Moderate Sell” rating on the energy stock.
2. Atlas Energy Solutions Stock
Atlas Energy Solutions Inc. (AESI) is a provider of high-quality proppant and an oilfield services specialist, offering “last mile” logistics to oil and gas producers operating primarily within the Permian Basin. AESI is valued at $1.79 billion by market cap, and the stock is up more than 6% YTD.
Atlas last reported earnings on Oct. 30, and the Q3 results were mixed. Revenue increased 1.7% YoY to $157.6 million, which topped estimates, but EPS of $0.55 missed the consensus forecast. Adjusted EBITDA increased to $84.1 million, while adjusted free cash flow came to $68.5 million. The company's Q4 earnings report will be released on Feb. 27, with Wall Street looking for EPS of $0.61 this time around.
Earlier this month, Atlas hiked its quarterly dividend payment by 5% to $0.21 per share, which translates to a forward yield of right around 3%.
Analysts are optimistic on AESI, judging by the consensus “Strong Buy” rating and the mean price target of $24.00, which represents a 31% premium to current levels. Out of the 10 analysts tracking the stock, 9 have a “Strong Buy” rating while 1 has a “Moderate Buy” rating.
