We are entering a new paradigm for the oil and gas industry, one far removed from the Trump Presidency’s pro-drilling policies. The Biden Admin is likely to cut back on oil and gas production in the US, in favor of promoting renewable energy sources and carbon pollution reduction. In the short run, his policies are likely to push oil and gas prices up – and that may turn out to help the hydrocarbon sector, at least at the bottom line, over the coming year. But for the oil companies, the lessons of 2020 appear in the balance sheets. The massive spike down in prices last May, followed by a quick recovery, only to finish the year at roughly the same price as it began – all of this has the producers looking to cut back on spending, consolidate or reduce debt, and maintain free cash flow. In the words of Raymond James’ oil industry analyst John Freeman: “[We] enter 4Q20 earnings and 2021 capital budget season with WTI trading, ironically, in essentially the same low $50s range as we did this time last year. While crude is largely in the same spot, the industry has definitely undergone a strategic shift with balance sheet health and returning capital to shareholders by far the highest priorities.” In addition to noting the general trend of the industry after a difficult year, Freeman has also been updating his stance on individual oil and gas stocks. Two in particular have gotten Freeman’s attention. He sees at least 50% upside potential for each of them. We ran the two through TipRanks’ database to see what other Wall Street’s analysts have to say about them. Apache Corporation (APA) With headquarters in Houston, Texas, Apache is an important operator in the North American oil industry. The company’s US hydrocarbon exploration and production activities are located in the Permian Basin, along the Gulf Coast, and in the Gulf Mexico. Apache also has operations in the UK (in the North Sea), in Egypt (in the Western Desert), and in Suriname (offshore). The company’s Permian holdings include 665.8 million barrels of oil equivalent, 66% of its proven reserves. The company beat the quarterly revenue expectations in the third quarter, with $1.12 billion at the top line. Since reporting the Q3 revenue, Apache’s stock has gained 71%. The company reported 445,000 barrels of oil equivalent per day in Q3 production. Covering the stock for Raymond James, analyst John Freeman writes: “We continue to like Apache’s diversified portfolio of U.S. onshore and international assets (Egypt, the North Sea, and Suriname), and given Apache’s considerable commodity exposure (only hedged Waha basis in 2021), the company is ideally situated to capitalize on our projected resurgence in commodity prices in the 2021/2022 timeframe. Adding to this, the operator has an extremely robust FCF profile [and] proven commitment to capital discipline…” In line with these comments, the analyst gives APA a Strong Buy rating and a $24 price target that implies a 60% upside potential over the coming 12 months. (To watch Freeman’s track record, click here) Freeman leads the Bulls on Apache. The stock has a Moderate Buy from the analyst consensus, based on 12 reviews that include 6 Buys, 5 Holds, and 1 Sell. The shares are selling for $14.94, and their $19.30 average price target suggests room for 29% upside growth this year. (See APA stock analysis on TipRanks) Diamondback Energy (FANG) Also based in Texas, Diamondback Energy is another player in the Permian Basin energy boom. The company boasts an $8.9 billion market cap and saw revenues hit $720 million in the third quarter of 2020. Production in the quarter averaged 287.8 thousand barrels of oil equivalent per day. Diamondback’s reserves total more than 1.12 billion barrels of oil equivalent, of which 63% are oil and 37% are natural gas and related liquids. Diamondback is expanding its operations through M&A activity. In December of last year, the company announced that it will be acquiring QEP Resources, a natural gas driller in the Midland Basin of the Permian formation along with operations in North Dakota’s Williston formation. The acquisition is an all-stock deal, worth an estimated $2.2 billion. QEP brings 49,000 acres in the Midland for potential development, an average production of 48,300 thousand BOE per day, and 48 ‘drilled but uncompleted’ wells. These assets are accretive to Diamondback’s portfolio. In a related piece of news, Diamondback has announced that it will also be acquiring Guidon, another rival Texas oil producer. Guidon brings additional Permian assets to Diamondback, and the acquisition is significant, valued at $862 million in both cash and stock. Casting his eye on Diamondback, Freeman sees the company in a strong position to meet the challenges of both the energy environment and the Biden Administration’s regulatory policies. “Going forward with the addition of QEP and Guidon acreage we anticipate the Midland accounts for ~75% of pro forma activity. Note that even after the QEP/Guidon acquisitions, FANG still has no federal acreage exposure – a significant positive given regulatory uncertainty will likely persist following the expiration of the 60-day leasing moratorium… We believe FANG offers considerable upside potential over the long-term and are confident in the company’s ability to weather near-term commodity uncertainties,” Freeman opined. Unsurprisingly, Freeman rates FANG as a Strong Buy, along with a $91 price target. This figure indicates confidence in ~51% growth over the next 12 months. (To watch Freeman’s track record, click here) There’s broad agreement on Wall Street with Freeman’s position here. FANG stock holds a Strong Buy rating from the analyst consensus, based on 13 recent Buy reviews against just 3 Holds. The average price target is $67.37, which implies ~12% upside from the current trading price of $67.37. (See FANG stock analysis on TipRanks) To find good ideas for oil stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. 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.