Despite a volatile market, some corners of the investing world have held up pretty well. Beyond the health care space, one segment that is well-positioned for further gains seems to be energy, as this sector has easily crushed the broad market as of late, and thanks to broad geopolitical concerns, could be ready to soar in the near future as well.
This trend is especially apparent for companies that focus in on domestic oil and gas plays, as many Western nations could look to friendlier locales in order to get their oil after the Russian debacle. Fortunately, there are a number of small and mid cap companies to choose from in this space that have begun to tap into more unconventional fields in the U.S. and could see their stock prices soar as they uncover new opportunities in the near future.
One such company that might be a great pick in this space is RSP Permian (NYSE:RSPP). This Texas-based firm is zeroed in on the Permian Basin of West Texas and, through its horizontal rig operations, is in the business of acquiring, exploring, and developing unconventional oil and gas reserves in this region.
RSPP in Focus
RSP Permian has more than 39,000 acres under its control in the Permian Basin, while through its horizontal drilling process, it has access to roughly 160,000 net acres. This is a pretty hydrocarbon rich area of the nation and there is great potential for more production in this region using modern techniques.
Currently, RSPP produces about 9.3 MBOE/d while the firm has proved reserves of about 55.6 MMBOE, the majority of which is in oil. So, the firm is tilted more towards oil than natural gas which can help to improve stability since gas prices are often more volatile, while it still has plenty of proven reserves that can be tapped.
If that wasn’t enough, the company has little in terms of net debt so it is in a favorable financial position. The company should be fine from a debt perspective in a slowdown, as it has the capacity to increase its debt load in order spend more to boost production, giving the company plenty of options.
Thanks to this solid position, robust reserves and a great oil price trend, many analysts have been moving their estimates higher for RSPP as of late too. In fact, not a single earnings estimate for RSPP has gone lower in the past 60 days for any of the time periods that we study, suggesting near-universal agreement about RSPP’s fortunes going forward.
Recent Estimates in Focus
Analysts have drastically pushed up their estimates for RSPP’s growth when looking at the current year time frame suggesting that they are believers in the company’s ability to increase earnings. In fact, the firm has seen its consensus estimate rise from 79 cents a share 60 days ago to $1.01/share today, giving RSPP a projected EPS growth rate of over 81%.
Next year’s growth figures and earnings estimate revisions are also impressive, as the firm is expected to grow earnings by over 35% that year. Once again, this is due to some revised estimates which have moved from $1.13/share 60 days ago to $1.37/share today.
Thanks to these factors, we currently have a Zacks Rank #1 (Strong Buy) on RSPP. This means that we are looking for a degree of outperformance on this stock in the near term, and given its impressive fundamentals and potential, it could be a great pick for investors seeking a solid name in this space.
Currently, the US oil/gas exploration and production space has a top 25% Zacks Industry Rank, so the industry trend is pretty favorable. Investors are embracing names in this space due to the new geopolitical realities, strong oil prices, and for the fact that this sector has proven its ability to hold up quite well in the recent market turbulence.
If you are just looking for a single pick here though, you might want to consider RSPP. This firm has a great growth rate, little debt, and strong earnings estimate revisions suggesting that the best may be ahead for this overlooked company in the near future.
- RSP PERMIAN INC: Free Stock Analysis Report (email registration required)