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T. Boone Pickens was in the news this week. On CNBC he stated New York and New Jersey needed to go to "odd/even" days at gas stations to cut the lines and get gas more efficiently to motorists until electricity is restored in the stricken region. New Jersey soon instituted that solution thereafter. He also came out saying natural gas prices would reach $4.50 to $5.00 MMbcf in 2013 and reach $6 by 2015. He shared two favorite picks based on that thesis as well. They are below.

National Oilwell Varco (NYSE:NOV) designs, constructs, manufactures, and sells systems, components, and products for oil and gas drilling and production, as well as provides oilfield services and supplies.

Four reasons NOV is undervalued at under $72 a share:

  1. T. Boone Pickens' price target on the shares and the median price target held by the 22 analysts that follow the shares is $92 a share. S&P has a "buy" rating and a $95 price target on the shares.

  2. The company has grown revenues at an approximate 10% annual pace over the past 5 years and the stock has a five year projected PEG of under 1 (.68). Revenue is set to increase over 30% this fiscal year and project to grow more than 15% in FY2013.

  3. Earnings are marching up nicely. NOV made $4.77 a share in FY2011 and is on track to make over $5.75 a share in this fiscal year. Analysts expect over $6.80 in EPS in FY2013.

  4. The company has met or beat earnings for each of the last six quarters. The stock sells for less than 11x forward earnings, a discount to its five year average (13.1).

Pioneer Natural Resources (NYSE:PXD) is an independent oil and gas exploration and production company in the United States and South Africa.

Four reasons to buy PXD at just over $109 a share:

  1. Mr. Pickens believes the shares are worth $150 a share. The 25 analysts that hold an opinion on the stock have a median price target of $125 a share on PXD.

  2. Operating cash flow has grown over 350% over the last three years and the stock sells for approximately 7 times operating cash flow.

  3. Pioneer has grown revenues at around a 9% annual clip over the past five years. Sales growth is expected to accelerate from 10% this fiscal year to over 20% in FY2013.

  4. Liquids production is expected to be 65% by 2014 up from 56% in 2011. It expects to grow total production at a 20% CAGR through 2014 as well.

Disclosure: I am long NOV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: T. Boone Pickens' 2 Favorite Energy Plays