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According to Raymond James, it’s time to get these two oil stocks bullish

We are entering a new paradigm for the oil and gas industry that is a far cry from the pro-drilling policies of the Trump presidency. The Biden administrator is likely to cut down oil and gas production in the US to promote renewable energy sources and reduce carbon emissions. In the short term, his policies are likely to drive oil and gas prices higher – and this could help the hydrocarbon sector at least the bottom line in the coming year. For the oil companies, however, the 2020 lessons appear on the balance sheets. The massive drop in prices last May, followed by a rapid rebound to end the year at roughly the same price as it started – all of which has prompted producers to cut their spending, consolidate or reduce debt, and stay free of cash in circulation . In the words of Raymond James’ oil industry analyst John Freeman: “[We] Ironically, WTI trading starts in the fourth quarter of 20 and the 2021 capital budget season, in essentially the same low range of $ 50 as last year around that time. While crude oil is largely in the same spot, the industry has definitely undergone a strategic shift, with balance sheet health and returning capital to shareholders by far the top priorities. “Not only did Freeman catch the general trend in the industry after a difficult year, he updated his stance on individual oil and gas stocks. Two in particular caught Freeman’s attention. He sees an upside potential of at least 50% for each of them. We went through the two on TipRanks’ database to see what other Wall Street analysts had to say about them. Apache Corporation (APA) Headquartered in Houston, Texas, Apache is a major operator in the North American oil industry. The company’s US hydrocarbon exploration and production activities are located in the Permian Basin, along the Gulf Coast and in the Gulf of Mexico. Apache also operates in the UK (in the North Sea), Egypt (in the western desert) and Suriname (off the coast). The Company’s Permian holdings are 665.8 million barrels of oil equivalent, 66% of its proven reserves. The company surpassed quarterly revenue expectations in the third quarter with $ 1.12 billion at the top. Since reporting third-quarter sales, Apache stock has gained 71%. The company reported 445,000 barrels of oil equivalent per day in the third quarter. Commenting on Raymond James’ stock, analyst John Freeman said: “We continue to like Apache’s diversified portfolio of US onshore and international assets (Egypt, North Sea and Suriname) and given Apache’s substantial commodity exposure (only Waha hedged base per year 2021)) the company is ideally situated to benefit from our forecast revival in commodity prices in the period 2021/2022. In addition, the operator has an extremely robust FCF profile [and] Proven commitment to capital discipline… “In line with these comments, the analyst gives APA a strong buy rating and a target price of $ 24, which implies an upside potential of 60% over the next 12 months. (To see Freeman’s track record, click here) Freeman leads the cops on Apache. The stock has a modest buy from analyst consensus based on 12 ratings, including 6 buys, 5 holds, and 1 sell. The shares sell for $ 14.94, and their average price target of $ 19.30 suggests 29% growth this year. (See APA stock analysis on TipRanks) Diamondback Energy (FANG) Texas-based Diamondback Energy is another player in the Permian Basin energy boom. The company has a market capitalization of $ 8.9 billion and had revenue of $ 720 million in the third quarter of 2020. Average production for the quarter was 287.8 thousand barrels of oil equivalent per day. Diamondback’s reserves are more than 1.12 billion barrels of oil equivalent, of which 63% is oil and 37% is natural gas and related liquids. Diamondback is expanding its activities through M&A activities. In December last year, the company announced that it would acquire QEP Resources, a natural gas drill in the Midland Basin of the Permian Formation, and operations in the Williston Formation, North Dakota. The acquisition is an all-stock deal valued at an estimated $ 2.2 billion. QEP brings 49,000 acres to the Central Plateau for potential development, average production of 48,300,000 BOE per day and 48 holes drilled but incomplete. These assets contribute to Diamondback’s portfolio. In similar news, Diamondback announced it would take over Guidon, another rival Texas oil producer. Guidon is bringing additional Permian assets to Diamondback, and the acquisition is significant and is valued at $ 862 million in cash and stock. Taking a look at Diamondback, Freeman sees the company in a strong position to meet the challenges of both the energy environment and the regulatory guidelines of the Biden Administration. “With the addition of QEP and Guidon acreage, we expect Midland to account for ~ 75% of the pro forma activity. Note that even after the QEP / Guidon acquisitions, FANG does not yet have any federal acreage risk. Given the regulatory uncertainty, a significant positive reading is likely to remain after the 60-day leasing moratorium expires. We believe that FANG has significant upside potential over the long term and we are confident that the company can address short term raw material uncertainties, ”said Freeman. Unsurprisingly, Freeman rates FANG as a strong buy along with a target price of $ 91. This number shows confidence in ~ 51% growth over the next 12 months. (To see Freeman’s track record, click here.) On Wall Street, there is broad alignment with Freeman’s position here. FANG shares have a strong buy rating from the analyst consensus based on 13 recent buy ratings against just 3 holds. The average target price is $ 67.37, which is an upward movement of ~ 12% from the current trading price of $ 67.37. (See FANG stock analysis on TipRanks.) To find great ideas for trading oil stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock insights. Disclaimer: The opinions expressed in this article are solely those of the presented analyst. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.