Drillers are expanding in oil-rich North American shale plays such as the Bakken formation in North Dakota and Montana, the Marcellus play in the Appalachian region and Texas' Eagle Ford formation. Rising oil prices and a turn toward domestic production are adding momentum.
Companies poised to profit from the possible boom include Abraxas Petroleum Corp., based in San Antonio; GeoResources Inc. and Magnum Hunter Resources Corp., based in Houston; QEP Resources Inc. and Whiting Petroleum Corp., based in Denver, Robert W. Baird & Co. analyst Hsulin Peng wrote in research notes Thursday. Peng initiated coverage of those companies with "outperform" ratings.
Baird also initiated coverage of EOG Resources Inc. and Southwestern Energy Co., based in Houston; Range Resources Corp., based in Fort Worth; and EQT Corp., based in Pittsburgh. Those companies received initial ratings of "neutral."
All nine companies are positioned to expand in the Bakken or Marcellus formations.
The North American shale plays traditionally have been drilled for natural gas, but some also hold oil deposits. With natural gas prices lagging and oil heating up, companies with access to oil are shifting their focus.
To maximize their profits, companies such as Abraxas and EOG must scale back natural gas production and increase oil operations, Peng said. Abraxas' oil production likely will increase to 56 percent in 2012 from 35 percent in 2010, while natural gas production will decrease, she said.
New drilling technologies are making both types of deposits easier to reach.
Shares of Whiting jumped $3.46, or 2.9 percent, to close Thursday at $124.56, while Abraxas leaped 36 cents, or 7.4 percent, to $5.23 and GeoResources shares gained 50 cents, or 1.7 percent, to $29.83.
Shares of QEP slipped 5 to $39.30. EOG shares added $1.23, or 1.2 percent, to $104.22.
Shares of EQT gave up 20 cents to $47.49. Range Resources fell 49 cents, or 1 percent, to $48.69, and Southwestern Energy shares dropped 81 cents, or 2.2 percent, to $36.19.