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Analyst Sees Upside in Small-Cap Oil Stocks

High energy prices may be tough on consumers -- but Leo Mariani wants "Power Lunch" viewers to profit from them. The senior equity analyst at RBC Capital Markets joined CNBC's Bill Griffeth to tout the energy stocks he likes.

With natural gas trading in the "high 70s" and crude oil trading "64 to 65," Mariani predicts you'll see robust drilling in the U.S. in "the foreseeable future." Despite the "nice run for E/P stocks," he said there's still opportunity out there -- in the small-cap space.

Mariani's recommendations:

- Swift Energy. The analyst says this firm "can do very well this year." Currently trading at a 20% discount to its assessed potential reserves, he says the firm "will grow production at 5% to 10%" annually for the next few years. He also sees "an acquisition" in Swift's future.

- Parallel Petroleum. Mariani says its "story has great upside" for the second half of the year. He cites its "massive" acreage positions in the Permian Basin -- and says the firm will accelerate drilling into the future. He believes the production growth rate will be about 20% for the rest of the year and into early 2008.

- Rame Energy. The analyst calls this natural gas company "sort of undervalued," trading at a 30%-plus discount to its net asset value. He predicts accelerated drilling in the Barnett Shale in the second half, which should push the firm's production growth "to over 15%."

Analyst disclosure: Rame Energy is an investment banking client of RBC Capital Markets.