One analyst is taking a decidedly bullish stance—on oil stocks?
Sitting in a rut after being battered by falling crude prices, many U.S. energy stocks may soon blow past broader U.S. markets, said Lloyd Byrne, managing director and head of North American exploration and production research at Nomura. The firm on Tuesday initiated coverage of large-cap E&P stocks, projecting upside because of sluggish performance and expectations for increasing oil prices.
"I think the risk-reward in the names today is compelling," Byrne said Wednesday in a CNBC "Power Lunch" interview.
A 40 percent drop in West Texas Intermediate crude prices in the last year has left many production stocks reeling. The commodity settled 45 cents lower at $56.16 a barrel on Wednesday.
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But Nomura has put a "buy" rating on some names that took a nosedive in that span, including Anadarko Petroleum and Continental Resources.
Byrne contends that many exploration and production names are cheap following a rough patch. Nomura expects the average price of crude oil to climb for each of the next two years, giving the names more profit potential.
But the broader industry has not taken as optimistic a stance on price recovery. Some, including British Petroleum CEO Bob Dudley, have said the industry needs to adjust to make money in a lower oil price environment.
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Dudley said on Tuesday that oil would stay "lower for longer," possibly staying near its current levels for "several years."