KeyBanc is bullish on these 2 energy stocks

KeyBanc Capital Markets has initiated coverage on the shares of two energy companies, with an Overweight rating on each, even as several catalysts are expected to play out for these names.The two companies are Permian Resources (PR) (price target $25) and National Fuel Gas (NFG) (price target $110).The firm’s bullish view on Permian Resources is based on its “higher for longer” view on WTI crude futures as well as the Brent-WTI spread, as a result of the Iran war. The firm said it is constructive on most oil-focused names within its coverage, as it views medium-term oil futures strip prices as too low.According to KeyBanc, these low prices are based on expectations for the crisis to resolve and for crude flows to normalize, something the firm does not expect will play out given continued violence and uncertainty in the Middle East.“Given this dislocation (in our view), we see continued upside for many names, including Permian Resources,” the analysts said.The firm is also bullish on the oil and natural gas company given its “many client inbounds, consistent financial and field execution, and its stature as one of the few remaining large Permian pure-plays.” Following the creation of the company in 2022 through the Centennial-Colgate merger, the firm was sceptical about the two CEOs’ ability to run the company, but notes that they have executed well and kept leverage low and cash returns straightforward. And while PR shares are up around 51% YTD, the firm notes that valuations remain attractive.As for National Fuel Gas, KeyBanc notes that it is “an under-the-radar Energy story” despite growth initiatives and positive catalysts playing out.The integrated natural gas company has three segments, viz. Integrated Upstream & Gathering, Pipeline & Storage, and Utility. Analysts at KeyBanc point out that the company’s pending $2.6 billion acquisition of CenterPoint Energy’s Ohio gas utility business will create a much larger local distribution company and double NFG’s rate base.“The increased scale for this regulated business further stabilizes the broader earnings profile, while also fortifying NFG’s IG credit rating,” they said.Within the Integrated Upstream & Gathering segment, the firm anticipates efficiency tailwinds from the activity pivot to the Eastern Development Area. Within the regulated segments, organic and inorganic growth opportunities are expected to drive scale and stabilize the company’s earnings base.“Looking forward, we expect NFG to leverage its acreage and gathering footprint, its Pipeline and Storage segments, and its IG credit rating to pursue inorganic growth opportunities from power gen and data centers to secure better pricing for its natural gas,” the analysts added.