Jim Cramer Says Oil Prices Headed for a Rebound; Here are 3 oil stocks that could gain

The sale is over and it’s time to buy again. No, unfortunately this is not a prognosis for the stock market in general, but rather CNBC’s Jim Cramer’s recommendation for investors eyeing the oil sector.

“The charts, as interpreted by Carley Garner, suggest that oil speculators have mostly been wiped out,” the Mad Money host said Tuesday, “so it’s time to buy the dips because she wouldn’t be the least bit surprised if crude can fetch another $20 from here.

According to Cramer, Garner’s prediction of a drop in oil prices is taking shape, and as China’s economy begins to recover and the Biden administration moves to replenish the Strategic Oil Reserve whenever prices dip below 70 dollars a barrel, oil prices may be about to rise. out again.

So, if this is indeed going to pan out, oil inventories could rally as well. With that in mind, we delved into the TipRanks database and gathered details on three names that could potentially earn from the rebound. All are classified as Strong Buys by analyst consensus and poised to move forward in the coming months. Let’s check the details.

Magnolia Oil and Gas (MGY extension)

We’ll start with Magnolia Oil & Gas, a company that does what it promises. MGY is an oil and gas exploration and production specialist with operations based primarily in the core of the Eagle Ford Shale and Austin Chalk Formations in South Texas. Its assets include ~23,600 net acres in Karnes and ~450,000 net acres in the Giddings area, the latter an expanse the company sees as an emerging oil play with significant upside and substantial inventory.

And going by the latest set of quarterly results, that’s just the case. In the third quarter, total production increased 21% over the same period a year ago and 10% quarter-over-quarter to 81.5k barrels of oil equivalent per day (“MBoe/day”). Total volume was not only 7% higher than the high end of the production range, but also achieved a quarterly record.

The result was revenue of $482.97 million, an increase of 69.4% year over year, beating analyst forecasts of $40.36 million. Similarly, on the bottom line, EPS of $1.29 came in at $0.12 above the $1.17 expected on Wall Street. The company now expects full-year output growth to be about 15% to 16% above 2021 levels, an increase from previous expectations of between 12% and 14% output growth. %. The company also repurchased 3 million shares during the quarter, bringing its year-to-date tally to 13.1 million.

This latter act caught the attention of Truist analyst Neal Dingmann, who writes: “Magnolia’s strategy since day one has always been to reinvest only a small percentage of earnings to grow the business while allowing distribution of the majority of the capital to investors. The plan remains the same with the company only needing to reinvest about 1/3 of EBITDA to keep production stable; much of this is due in part to Giddings’ continued improvement in results.”

“Even with no changes to our 2023 forecast at the two plants, we estimate 2023 sequential production growth of 10%+, helping to generate strong FCF and shareholder returns as they prepare for another remarkable year,” he summarized. the analyst

As a result, the 5-star analyst rates MGY a buy, backed by a $39 price target. The implications for investors? Upside of 67% from current levels. (To look at Dingman’s track record, Click here)

The stock has garnered 5 analyst reviews in the past few weeks, narrowing from 4 to 1 in favor of Buys over Holds, creating a Strong Buy consensus rating. At $32.60, the medium target leaves room for 12-month gains of ~40%. (See MGY stock forecast on TipRanks)

Matador Resource Company (MTDR extension)

The next oil stock we’re looking at is Matador Resources Company. Its operations are primarily concentrated in the Delaware Basin in southeastern New Mexico and West Texas, particularly in the oil and liquid rich areas of the Wolfcamp and Bone Spring games. There are also operations in Haynesville Shale and Cotton Valley in northwest Louisiana, as well as Eagle Ford Shale in south Texas. In addition, the company oversees midstream operations, through a 51% ownership stake in San Mateo Midstream.

In keeping with the 2022 narrative, the company posted strong quarterly results, as was the case with Q3 print. Revenue increased 78% year over year to $840.93 million, topping Street’s call by a whopping $100.7 million. adj. EPS improved 114% from the same period a year ago to $2.68, topping the $2.53 forecast.

The company achieved an average oil and natural gas equivalent production of over 105,000 barrels of oil and natural gas equivalent (BOE) per day, a 4% above guidance and to top it off, the company raised the midpoints of its total 2022 oil and natural gas production prospects.

It’s the sort of performance that has drawn applause from RBC analyst Scott Hanold.

“MTDR’s strong financial position offers options that we believe will include further debt reduction, higher shareholder returns, and opportunistic growth that could include acquisitions and/or increased business. Management will likely be measured fairly against the use of liquidity, so we expect to maintain a higher liquidity balance for continued flexibility and as a cushion for commodity price volatility,” Hanold noted.

To that end, Hanold thinks there’s more room to run. Coupled with an Outperform (aka Buy) rating, the 5-Star Analyst’s $78 price target leaves room for one-year gains of 34%. (To look at Hanold’s track record, Click here)

The rest of the way is completely boarded up here. With only Buy ratings – 7, total – the stock naturally claims a Strong Buy consensus rating. The forecast calls for the stock to appreciate about 31% over the next year, considering the average target is $76.29. (See MTDR Stock Predictions on TipRanks)

Permian Resources Corporation (PR)

The last oil stock we come across is Permian Resources. Headquartered in Midland, Texas, as its name suggests, this independent E&P firm’s operations are targeted at the Permian Basin, with its oil and gas properties centered in the heart of the Delaware Basin. Permian Resources is essentially a new company. Previously known as Centennial Resource Development, it was formed through a merger of equals with Colgate Energy. The transaction closed on September 1, making it the largest pure-play E&P company in the Delaware Basin.

In its first report since the merger (to which the combined entity contributed one month), the company performed well. Third-quarter haul showed $549.78 million, which was a 90.6% increase over the same period last year, also coming in at $30.93 million above Street’s forecast. Similarly, at $0.70, diluted EPS was up significantly from the $0.12 reported in the year-ago quarter and handily beat the $0.45 forecasts.

In addition, the company announced a capital return program, under which it will provide shareholders with at least 50% of free cash flow after the base dividend (currently a quarterly fixed dividend of $0.05 per share, with a yield of 2% per annum).

RBC’s Scott Hanold is impressed with what’s on offer and expects more of the same going forward. He writes, “The inaugural quarter for the new Permian Resources (CDEV + Colgate) demonstrated the combined benefits for operations and we expect to see further progress in 2023.”

“Management is still confident in its 2023 outlook provided in early September and expects to see similar, if not better, capital efficiencies in next year’s program than in previous years due to scale and earnings advantages efficiencies expected on D&C (drilling and completions) along with shared best practices,” added Hanold.

In keeping with his optimistic approach, Hanold rates PR shares an Outperform (aka Buy) and his $12 price target suggests a potential 31% upside next year.

And the rest of the way? Barring one skeptic, all 8 other recent analyst reviews are positive, making the consensus view here a strong buy. Following the $12.33 average target, the stock is expected to produce ~34% returns over the next year. (See PR Stock Predictions on TipRanks)

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Disclaimer: The views expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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