While the oil market can vary, much of that volatility tends to float on the surface – like oil on water. Underneath it, long-term trends – the currents in the water – are churning in the depths.
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Prices for hydrocarbon energy sources are tending downwards, facing pressures from a glut in global supplies, rising inventories, and lower-than-expected demand. The result: expectations of lower prices in 2026.
Mark Lear, energy expert from Piper Sandler, has been watching the situation carefully in an effort to predict what’s coming down the pike. Laying out his position, Lear writes, “Energy isn’t going out quietly in FY25 with oil finally breaking down to fresh four-year lows… Looking to FY26, we see a light at the end of the tunnel for oil with the commodity trading well below our view on mid-cycle, where gas has been more of a consensus long on secular demand expectations despite cyclical risks and a strip that was recently well above our view of mid-cycle. That said, for a group where equity performance has been more dictated by investor positioning than valuation or other fundamental drivers, we ultimately think the near-term opportunity is likely skewed in the favor of gas equity vs. oil, mainly given the magnitude of the gas pullback and the fact that winter has barely begun.”
Following from this stance, Lear has chosen a few energy stocks as ‘top picks’ for the coming year. We’ve opened up the TipRanks platform to explore how Wall Street is viewing three of them.
Diamondback Energy (FANG)
We’ll start with a major player in the North American oil and gas industry, Diamondback Energy. This company, founded in 2007, has extensive holdings in the West Texas Permian Basin and boasts a $42 billion-plus market cap. Diamondback is based in Midland, Texas.
A look at the company’s holdings shows that most of Diamondback’s operations are located in the Wolfcamp, Spraberry, and Bone Spring formations in the Permian Basin of West Texas. The company focuses on acquiring, developing, and exploiting unconventional, onshore oil and natural gas reserves. It makes extensive use of horizontal drilling technology in its activities.
Diamondback is known as an independent oil and natural gas company, and in addition to horizontal drilling, it also uses hydraulic fracturing, among other methods. Diamondback is one of the leading players working in the hydrocarbon-rich Permian Basin.
Diamondback’s operations generate significant revenue and earnings. In the last reported quarter, 3Q25, the company had a top line of $3.92 billion. This figure was up an impressive 48% from the prior-year period, and it beat estimates by $394.3 million. At its bottom line, Diamondback’s non-GAAP EPS of $3.08 was 14 cents per share better than expected.
The company paid a $1 per share dividend on November 20. The annualized rate of $4 per common share gives a forward yield of 2.7%. In addition to its dividend policy, Diamondback has an active share repurchase policy. Earlier this month, it announced that it had entered into an agreement with its largest shareholder, SGF FANG Holdings, for the repurchase of up to 3 million shares. The agreement is expected to be supportive of the share price going forward.
For Piper Sandler’s Mark Lear, the important point here is Diamondback’s strong position and clear path to continued profits. He writes, “FANG is our top large cap E&P given its position as the low-cost operator in the Permian, long runway of low breakeven projects, consistent execution and line of sight on further efficiency improvements. The company has consistently delivered the strongest asset level performance despite having long ago shifted to full stack development, while we see the company driving the lowest strip reinvestment rate of its oil & gas peers demonstrating the low-cost nature of its asset base. The recent repurchase agreement with the Stephens family removes the risk of a secondary offering weighing on the stock.”
These comments back up Lear’s Overweight (Buy) rating on the stock, while his $219 price target points toward a 50% upside in the coming year. (To watch Lear’s track record, click here.)
This stock’s Strong Buy consensus rating is based on 21 recent analyst reviews, that include 20 Buys and 1 Hold. The stock is priced at $146.31 and its $179.65 average target price implies a ~23% gain on the one-year horizon. (See FANG stock forecast)
Expand Energy (EXE)
Oklahoma City-based Expand Energy (which rebranded last fall following Chesapeake Energy’s acquisition of Southwestern Energy) operates as another independent hydrocarbon producer in the U.S. market. The company has put together a portfolio of high-quality and large-scale assets totaling some 1.83 million acres in Louisiana, Ohio, West Virginia, and Pennsylvania.
Expand’s operations can be divided into three broad categories: horizontal drilling, which can extend up to 3 miles underground and can allow more access to more reserves with “less surface disturbance;” hydraulic fracturing, during which the company creates “micro-fractures” that allow oil and natural gas to flow into the wellbores; and production, which brings the hydrocarbon fuels to the surface. Wells can last more than 40 years, according to the company.
In addition to crude oil and natural gas, Expand holds an important position in the LNG (liquefied natural gas) sector. The company’s gas production acts as a feeder to LNG facilities on the Gulf Coast. LNG is a vital fuel in the global economy, and the Gulf of Mexico is an important hub for it, in both production and shipping.
In 3Q25, the last reported quarter, Expand’s total revenue came to $2.97 billion; $1.85 billion of this came from natural gas, oil, and LNG. These figures were up from $648 million and $407 million, respectively, in the prior year period. Expand reported having 97 cents per share in non-GAAP earnings during Q3, up from 16 cents in 3Q24 and beating the forecast by 12 cents per share.
Lear likes Expand as well. In his note for Piper Sandler, Lear writes, “EXE remains our favorite pure-play in gas given attractive valuation, improving capital efficiency in the HV and proximity to premium gas markets. We see EXE delivering the best improvement in TSR in FY26 at the strip, and it checks all the other boxes in terms of discounted valuation relative to gas peers, low reinvestment rate, under 0.5x strip leverage and provides the best leverage to gas upside.”
When he quantifies this stance, the analyst gives EXE shares an Overweight (Buy) rating, with a $138 price target that suggests a one-year upside potential of 26%.
This stock has 20 analyst reviews on file, and the lopsided split, of 18 Buys and 2 Holds, supports a Strong Buy consensus rating. Shares in EXE are priced at $109.49 and the $132.83 average target price implies that the stock will gain 21% over the next 12 months. (See EXE stock forecast)
Coterra Energy, Inc. (CTRA)
Houston-based Coterra, the last company we’ll look at here, is another exploration and production firm in the U.S. hydrocarbon sector. Coterra focuses its operations in the Permian Basin, Marcellus Shale, and Anadarko Basin, three regions well-known for their rich deposits of fossil fuels.
Drilling down slightly (pun intended) to Coterra’s acreage holdings, we find that the company has 346,000 net acres in the Permian. In the Marcellus Shale, which sprawls from New York State to southern West Virginia and into Virginia, Coterra holds 186,000 acres. And finally, Coterra has 181,000 net acres in the Anadarko Basin of Oklahoma and northern Texas.
Coterra’s stated business policy is to generate reliable energy and deliver consistent returns for its shareholders. One way in which the company supports this policy is through its dividends, and in November, it paid a 22-cent common share dividend. At the annualized rate of 88 cents per common share, the dividend gives a forward yield of 3.4%.
The company brought in $1.82 billion in revenues during 3Q25, for a year-over-year increase of 34%. The quarterly revenue also came in higher than the forecasts by almost $63 million. Coterra’s non-GAAP income came to $312 million, or 41 cents per share; this figure missed expectations by two cents per share. Free cash flow in the quarter came to $533 million.
In his look at Coterra, Mark Lear is particularly impressed by the company’s strong asset base in Delaware Basin holdings and its potential to continue generating gains. The Piper Sandler expert says of this company, “CTRA is one of the most compelling values in our E&P coverage, with deep Delaware inventory, paired with low-cost gas resource in NEPA and the Anadarko. We see the company delivering some of the best gas leverage in the space, is positioned to benefit from improving WAHA basis in FY27+ and foresee FY26 marking a big inflection on TSR following a year of deleveraging.”
Lear’s Overweight (Buy) rating is based on this stance, and his $37 price target translates to a 43% upside potential by the end of next year.
The 14 recent analyst reviews here break down to 13 Buys and 1 Hold, backing up the Strong Buy consensus rating. Shares in Coterra are priced at $25.79, and the $32.93 average price target implies a one-year upside potential of 28%. (See CTRA stock forecast.)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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