Continental Resources (CLR), Approach Resources (AREX) and EOG Resources (EOG) Hold Top Shale and Basin Acreage

January 10, 2013

Some of the best-performing names among oil companies are expected to come from those owning acreage in top-producing U.S. shales and basins like Bakken, Eagle Ford, Permian and Utica, says Leo Mariani, RBC Capital Markets Analyst. These names also display improvement in capital efficiency for 2013.

“One of my favorites is Continental Resources (CLR). I expect to see a number of improvements in the Bakken play during 2013. I expect to see narrower price differentials versus WTI, lower well costs, and just general expansion in inventories in the plays due to successful downspacing and also successful test of the lower benches of the Three Forks reservoir,” Mariani said.

Mariani also likes Approach Resources (AREX), which has exposure to the Permian basin. He expects materially improved capital efficiency and higher production growth out of this company in 2013, and also continued successful horizontal wells drilled in the Permian and in multiple benches of the Wolfcamp.

His final favorite is EOG Resources (EOG), a name with acreage in the Eagle Ford in Texas. “Oil liquids growth, upwards of 30%, we think should occur, and during the year [EOG] may unveil a couple of new oil plays in the U.S., which could certainly add value. We also think they have a decent chance of erasing their free cash flow deficit. They have been outspending cash flow for a number of years, and to really get back much closer to positive by the end of the year, we think should be a catalyst for the company as they continue to ramp cash flow pretty aggressively,” Mariani said.