Get 'More Cowbell' With This Oil Play

BMO Capital Markets upgraded Oasis Petroleum Inc. (NYSE: OAS) to Outperform from Market Perform, noting that the company's 2016 "game plan," which emphasizes abundant liquidity, is on track.

Analyst Dan McSpirit said that Oasis supported the firm's view that oil stocks should have a "defensive quality, with growth attached." McSpirit said that the sector's other Outperform stocks, including Carrizo Oil & Gas, Inc. (NASDAQ: CRZO), Matador Resources Co (NYSE: MTDR) and Synergy Resources Corp (NYSE: SYRG), also have that same spirit.

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BMO said it was impressed that Oasis has wells "waiting on completion" which would "immediately contribute to production growth" if oil prices moved higher. Simultaneously, if oil prices remain lower, Oasis is "better positioned than most small-caps to weather" the climate.

Adding Oasis to a portfolio adds "torque, but in a way that the investor doesn't need to venture far out on the risk curve to get it." The company's leverage looks "elevated," but "liquidity remains abundant." Higher commodity prices will help the firm lower leverage, but regardless of where they move, McSpirit did not see the need for the firm to sell assets or equity.

Oasis was lower by nearly 3 percent on Monday, falling to $10.18. Year-to-date, the stock has sunk 38.5 percent, while prices are down 78 percent the past 12 months. BMO's $16 price target reflects a 57 percent upside to current prices. The stock last traded there in June.