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8 Little E&P Names Finding Big Oil


When big money is being spent on a point of view, such as oil exploration, the notions involved are usually worth considering.

Current technology advances are making "finding" opportunities, particularly of domestic natural-gas reserves, much more likely than has been the case in the past.

That reinforces the attraction of the E&P companies, for both the investor and the major integrated energy provider who has downstream customer supply commitments to be satisfied. Not to mention the attraction to the investment-bank M&A crowd.

1. EV Energy Partners LP
(EVEP) retains strong upside, with a sell target +14% higher. That's a bit above its average profit experience, but well below extreme gains it has experienced. Its past-year consistent growth earned a reward-risk ranking better than 97% of our overall population.

Drawdowns have been minimal, mostly -4% or less. The pros' past identifications have been quite timely, with 83% of the next three months' trading days closing at prices higher than the day of forecast.

2. Pioneer Natural Resources
(PXD) is another high-ranking buy candidate, besting 95% of the over 2,000 alternatives in our overall population on our reward-risk tradeoff scale.

As a more volatile performer, the odds-weighted return prospects are well above our +5% combined return investment minimum. Even so, drawdowns have been in single digits on average, and only -11% on a worst-case basis.

3. Brigham Exploration (BEXP) also meets our risk-balanced return hurdle with sufficient history to justify a buy recommendation.

Its odds for profit and past payoffs averaging +16% support a current upside sell target of +14%. Its record is better currently than 85% of our overall stock population.

4. Linn Energy LLC (LINE) boasts over 100 similar forecast days at least as attractive as the present, in which drawdowns averaged only -2%, and did not exceed -4% at most.

Its upside sell target is only +7% above current market, but as a low-risk candidate it outdoes 95% of all alternatives.

5. Concho Resources (CXO) is another strong recovery candidate. Its upside +13% sell target is well within reasonable reach.

Past experience of -7 to -9% drawdowns has been rewarded by double-digit profits following forecasts like that of the present. In the past year or so, it has contributed gains at a 56% annual rate on 23 buy recommendations.

6. Energy XXI [Bermuda] (EXXI) also looks good to the market-making crowd. Its upside +20% sell target is a bit of a reach, but within prior extremes.

Past drawdowns of but -8% and gains in almost three-quarters of the next three months' days following such forecasts rank EXXI better than 91% of any alternatives on our risk-reward scale.

7. Exco Resources
(XCO) has an ample history of producing stock price gains, averaging +16% in the three months following market-maker forecasts like the present, sometimes as large as +24%. Drawdowns can be as large as -11% in the process, but are recognized in the forecast.

Still, closing prices tend to be above cost more than five-eighths of the days on the way to the sell target.

8. Southwestern Energy
(SWN) has a long history of being identified by market pros at timely buy opportunities.

Prior marks have averaged 14% end-of-day gains in the following 3 months after over 150 forecasts like the present. Drawdowns of -6% were typical.

Editor's Note: This article was written by Peter Way of Block Traders' Oil and Gold Monitor.

No positions in stocks mentioned.
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