Shares of QEP Resources Inc. (QEP) hit a 52-week high of $35.48 on Aug 28. In fact, the Denver, CO-based independent energy company has seen its stock price climb some 22% over the past six months. The rally seems to be the result of investors' positive perception about QEP Resources’ diversified asset base, exposure to emerging plays and quality acreage in multiple basins
Why the Bullishness?
QEP Resources – a leading independent energy company engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids – possesses a diversified reserve base in multiple U.S. basins, to go with its focused investment in high-return areas such as the Pinedale, Uinta, Bakken and Permian.
Since its split from Questar Corp. (STR) in 2010, QEP Resources has established a strong track record of production growth, while maintaining a competitive cost structure, which contributes to the consistency of its growth and returns throughout the business cycle.
Additionally, management has not been shy of divesting assets, particularly those that do not fit into the company’s long-term growth plan. During 2013, QEP Resources sold approximately $200 million worth of non-core oil and gas properties around the world, thereby freeing up capital to concentrate on its longer-term high-grade prospects. In May 2014, the company unveiled another trio of deals to sell primarily gas assets in the Midcontinent and Williston Basin for a combined price of $807 million.
Finally, we remain positive on QEP Resources’ plans to pursue separation of its midstream segment, as it holds the promise of unlocking significant value. Importantly, the move will allow the company to improve its operational efficiency, as management will be able to focus all its attention on the upstream business.
Zacks Rank & Stock Pick
With QEP Resources shares trading at 52-week high, any upside from here may be limited, as suggested by the company's Zacks Rank #3 (Hold).
Meanwhile, one can look at Sanchez Energy Corp. (SN) and WPX Energy Inc. (WPX) as good buying opportunities in the energy exploration and production space. Both carry a Zacks Rank #1 (Strong Buy).
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