These oil stocks will be taken out next: Analyst

Energy takeover targets
Energy takeover targets   

The massive drop in oil prices since mid-2014 has created an environment that's ripe for consolidation, according to Global Hunter Securities Analyst Mike Kelly. In particular, he sees two names that could soon be swallowed up in a buyout.

"Any time that oil price corrects like this, it's an opportunity for deals," Kelly said on CNBC's "Fast Money" recently. Though crude prices have rallied more than 30 percent from March lows, they are still down 50 percent from highs above $100 hit in June of 2014.

"It's a heck of an opportunity to buy somebody on the cheap," Kelly added.

The two names that Kelly thinks are the most likely takeout candidates are Range Resources and Pioneer Natural Resources.

Focused on shale plays

Kelly said Range Resources' exposure to the Marcellus Shale and other Northeast U.S. formations makes it an attractive target. In a recent presentation, Range Resources said it was focused on production growth in the Marcellus, Upper Devonian and Utica Shale.

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And according to Kelly, the company sits on what could be a hidden reserve of oil that is being undervalued by investors. "It could be up to $5 billion in untapped resources," Kelly said. "It's got to be a great opportunity for a larger company."

Range Resources has largely mirrored the price action of crude, falling 50 percent from June 2014 to March 2015, before jumping 30 percent from March lows.

The other name on Kelly's list was Pioneer Natural Resources, which he dubbed a "no-brainer" takeout target.

Kelly thinks the company's longstanding expertise in drilling and its choice foothold in one of the country's most fertile oil basins makes it a prime candidate for a takeover. The stock has fallen 20 percent from its June high as oil prices have collapsed.

However, while Kelly sees Pioneer as a takeout target, others urge caution. "Fast Money" trader Guy Adami of Private Advisor Group said Pioneer's valuation was too rich for his taste. "The valuation in this stock is crazy," Adami said.