5 Energy Stocks Set To Soar

Includes: CHK, EGN, HPR, PXD, XOM
by: James Hartje

Below is a list of five intriguing energy stocks that we believe could become major winners in 2014 and beyond.

Bill Barrett Resources (BBG) +36%

Bill Barrett Corporation, an independent oil and gas company, engages in the exploration, development and production of crude oil and natural gas in the United States. BBG is a growing company that is finally on the rebound after being hit hard over the course of 2011 due to the sharp decline in gas prices. BBG's stock price crumbled with shares falling from $50 in the summer of 2011, all the way down to the upper teens by early 2012. The sharp plunge in gas prices set the stage for flat or even negative cash flow and eventually led to a complete firing of BBG's management team and the decision to bring in a whole new cast. It has been the new cast of senior management that has restructured BBG and set the company up for strong future long-term growth opportunities.

Despite all of its past struggles, Bill Barrett is now shaping up as a solid rebound play and the biggest worry going forward needs to be centered around what its future looks like, not its past. BBG's new management team is counting on firmer gas prices, which would rescue the cash flow statement, which has been subpar to say the least. Even while BBG's sales continue to rise, EBITDA has been stuck at around $400 million, highlighting compression in profit margins. Higher gas prices will surely aid BBG's future developments and luckily most analysts do expect gas prices to increase going forward. While BBG is not a highly covered stock by Wall Street analysts, it still has a few who follow along. Analysts at Goldman Sachs recently analyzed the impact that higher gas prices would have on BBG's business and as a result of the improved capital allocation plans, GS analysts raised their rating for BBG from HOLD to BUY setting a $27 price target, which from today's share price is close to a +30% yield! Global Hunter Securities also recently upgraded its position on BBG.

BBG is a stock that many investors should take a fresh look at as it's dramatically changed from where it use to be as the current direction the company has embarked on is something we expect to perform exceptionally well in the future. The market value of BBG is around $930 million, which is roughly $250 million less than current tangible book value. New management has been taking the necessary steps to streamline the business and boost cash flow along the way. Rising natural gas prices will certainly help the cause and be a big aide. Overall, we think BBG is a solid investment going forward and have set a 12-month price target of $28.50 per share, an annual return of +36%.

Pioneer Natural Resources Company (NYSE:PXD) +54.10%

Pioneer Natural Resources Company operates as an independent oil and gas exploration and production company in the United States. The company produces and sells oil, natural gas liquids and gas. Back in January, Pioneer Natural Resources announced a joint venture with Sinochem Petroleum, under which it will sell 40% of its interest in some 207,000 net acres in the Wolfcamp Shale play for about $1.7 billion. Both companies came to an agreement under which 86 horizontal wells are expected to be drilled in the Wolfcamp Shale during 2013, with a future extension to 165 in 2015. Pioneer shares have advanced by over 18% since the day of the announcement and currently trade near the $145 mark.

This was a big-time deal for PXD and one that we believe will only propel both the company and the stock price higher in the coming years. Despite only a market cap of $20 million, substantially reduced when compared to ExxonMobil 1/20th the size to be exact, PXD has shown a tenacity to make money. The numbers back up this claim with PXD bringing in $2.85 Billion in total revenue last quarter. Pioneer said it expects an annual production increase of 12% to 16% in 2012 through the 2013 period and aims 13% to 18% compound annual-production advancement for the 2012 through 2015 period.

Currently there are over 32 Wall Street Analysts covering PXD, of which 75% have a current recommendation of BUY or higher with the other 25% issuing a current HOLD rating. One of PXD's biggest supporters is George Soros, who's Hedge Fund recently increased its position in Pioneer Natural Resources by 200,000 shares, raising the total holding to 2.3 million shares, a total worth of $288.6 million. It's hard to not trust George Soros when it comes to investing decisions as historically the man's one of the all-time greats and has proven that consistently over time he always makes the right investment choices. We think Pioneer Natural Resources is a solid investment opportunity for investors who are looking for substantial growth opportunities. We have set a 12-month price target of $225, resulting in an annual return of 54%, which added with a 0.10% Dividend results in a total annual return of 54.10%.

Energen Corporation (NYSE:EGN) +25.10%

Energen Corporation , an energy holding company, engages in the development, acquisition, exploration and production of oil, natural gas, and natural gas liquids in the continental United States. With only a market cap of $3.7 Billion, Energen is definitely on the smaller side when compared with its peers such as ExxonMobil, Chevron and Halliburton. Involved in oil and gas exploration and production, Energen posted total production of oil and gas of about 5.9 million barrels of oil equivalents (MMBOE) in the first quarter of 2013 and said that it expects to reach 26.5 MMBOE by the end of 2013. This numbers are higher than expected - a bullish sign for future growth.

For 2012, the company reported total production of 24.1 MMBOE, so as you can see there's strong growth on the production side. Investors who like growth stocks will like Energen. It's one of the main reasons that sold investor George Soros, who's a big supporter of Pioneer. Soros's Hedge Fund recently increased its total position in PXD, which now sits at 1.1 million shares, a $56.9 million holding, which is substantially higher than the $17.4 million holding in Q4 of 2012. Soros has always been one to invest in growth stocks and that's what caught his eye when he originally invested in Energen. Profitability is another one of Energen's specialties as last quarter it brought in $1.69 Billion in total revenues. This resulted in a 15% Profitability Margin along with a 27% Operating Margin, solid numbers to say the least. It has been Energen's combination of solid numbers, strong book of business, and future growth opportunities that intrigue analysts most.

Of the total 16 analysts covering EGN, 57% have a current BUY recommendation or higher while the other 43% of analysts have issued a current Hold recommendation. We are somewhere in between that BUY to HOLD spot and we believe buying EGN on a substantial dip is the best play here, don't overspend, stay grounded. Our 12-month price target for EGN is $65 per share, an annual return of 24%, which added with a 1.10% Dividend results in a total annual return of 25.10%.

ExxonMobil (NYSE:XOM) +28.80%

Exxon Mobil Corporation (XOM) engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products. The company also transports and sells crude oil, natural gas and petroleum products. With a market cap of $400 Billion, ExxonMobil has become what many consider the most dominant worldwide energy producer. XOM is currently the U.S.'s top natural gas producer, which for it is a major win, however it has been a very vocal proponent of increasing natural gas exports. Due to the low price of natural gas in the U.S., XOM has been letting its natural gas production slowly decline. We believe that natural gas prices will rise significantly higher going forward. This is also the consensus opinion among Wall Street analysts, so we're not alone in our theory. If so this would reap great benefits to all of the top U.S. natural gas producers. Even with expected higher gas prices, XOM has no current plans to boost its natural gas production.

On the other hand, increased exports could change the company's plans, as Exxon will really benefit from increased natural gas exports. Maybe that's why XOM has taken such a vocal position in supporting future natural gas exports. From top to bottom, XOM is a well-oiled machine and one that has continued to perform both efficiently and effectively for many years. Its books and balance sheet are very strong, with great operating cash flow numbers along with $6.1 Billion in the bank. XOM has always benefited from having one of the best senior management teams. The hard work has paid off time and time again as it continues to showcase efficiency while growing a billion dollar company. XOM is a revenue machine bringing in over $415 billion in total revenues last quarter. This translated into strong profitability numbers as well with a Profit Margin of 11% and an Operating Margin of 14%. A major reason XOM has grown to become the dominant energy producer it is today is because of the management's efficiency and ability to grow and develop the company worldwide. Any outsider can see clearly that XOM has a great management team by examining the numbers. XOM boasts a great 11% Return on Assets along with a 29% Return on Equity.

Going forward our overall outlook on ExxonMobil is very strong, as we believe XOM is a solid long-term investment and we have set a 12-month price target of $112 per share, an annual return of 26%, which added with their 2.80% Dividend results in a total annual return of 28.80%.

Chesapeake Energy Corporation (NYSE:CHK) +49.2%

Chesapeake Energy Corporation engages in the acquisition, exploration, development, and production of natural gas and oil properties in the United States. The company also offers marketing, midstream, drilling and other oilfield services. Few companies would benefit to the degree as the second-largest natural gas producer, Chesapeake Energy. While CHK has been shifting toward liquids it still produces 4% of the total natural gas produced in the U.S.

IT is the largest producer on a gross basis at about 9% of our output. Overall, 76% of the company's total production is natural gas, meaning its stock is highly sensitive to any movement in that commodity's price. Increased exports, which will at least put a floor under the price of natural gas, could provide a big boost to Chesapeake's stock. We believe that natural gas prices will rise significantly higher going forward. This is also the consensus opinion among Wall Street analysts, so we're not alone in our theory. If natural gas prices do rise significantly then expect it to only propel CHK further as it will lead to a significant rise in total revenue, profit, etc. which all in return would lead to a surge in the stock price as well. Chesapeake's book of business looks solid from top to bottom. Also we found another bullish indicator regarding CHK as it has a current PEG Ratio of 0.29.

CHK is an interesting play and one to definitely watch closely and buy on a dip. If natural gas prices do rebound as expected then CHK will be one of the many beneficiaries leading to a surge in the company's stock price and overall performance. Our 12-month price target for CHK is $29.50 per share, a yield of 47.5%, which added with a 1.70% Dividend results in a total yield of 49.2%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.