WTI crude recently settled around $95 per barrel, while Brent approached $100.
Below, we highlight three undervalued mid-cap energy stocks positioned to capitalize on oil’s rally.
Amid escalating geopolitical tensions in the Middle East due to the conflict involving Iran, which has led to a near shutdown of the Strait of Hormuz and disruptions in regional oil production, crude prices have spiked dramatically.
(WTI) crude recently settled around $95 per barrel, while approached $100, with intraday highs pushing towards $105.
This surge, driven by supply constraints and fears of broader energy infrastructure attacks, creates a favorable environment for energy stocks, especially undervalued mid-caps with direct exposure to higher prices. Below, we spotlight three standout picks.
1. Talos Energy
Current Price: $13.53
Fair Value Estimate: $18.75 (+38.6% Upside)
Market Cap: $2.29 Billion
Talos Energy (NYSE:), a Gulf of Mexico-focused offshore explorer and producer, benefits directly from surging oil prices through its oil-heavy production mix. Shares are currently at $13.53, reflecting a robust YTD gain of around 23%.
InvestingPro’s Fair Value model rates TALO a Buy, with a price target of $18.75, implying 38.6% upside.
Recent share buybacks further signal confidence in sustained cash generation as prices climb.
The real kicker: Talos boasts a massive 43.5% EPS growth forecast for 2026, and a robust 19.8% free cash flow yield, which could make it a dark horse as oil markets tighten.
2. Patterson-UTI Energy
Current Price: $9.85
Fair Value Estimate: $12.06 (+22.5% Upside)
Market Cap: $3.74 Billion
Patterson-UTI Energy (NASDAQ:), a provider of drilling and pressure pumping services in key U.S. basins like the Permian, thrives on increased exploration activity spurred by elevated oil prices. Shares closed at $9.85 on Thursday, boasting an impressive YTD return of roughly 61%.
Source: InvestingPro
With a ‘Buy’ consensus rating, PTEN trades at a discount to its growth prospects and boasts a 22.5% fair value upside, while Goldman Sachs’ raised price target underscores potential for further gains amid rotating investor interest into mid-cap energy names.
Its February 2026 drilling activity report and positive post-earnings momentum make Patterson-UTI a leveraged bet on sustained volatility,
especially as geopolitical risks run high.
3. Northern Oil & Gas
Current Price: $27.61
Fair Value Estimate: $31.13 (+12.7% Upside)
Market Cap: $2.69 Billion
Northern Oil & Gas (NYSE:) operates a non-operator model with interests in the Williston and Permian Basins, generating stable, royalty-like revenues from oil-weighted assets. Shares are trading at $27.61, delivering a solid YTD return of 28.6% as investors seek exposure to resilient producers.
Source: InvestingPro
Trading at a forward P/E of 9.7—a discount to the sector average—NOG stock appears undervalued, with a solid 12.7% fair value upside, and 13% analyst target upside. The company’s Financial Health score of 2.91 is the best in the group, signaling relative balance sheet strength.
Recent expansions into the Utica shale and a steady dividend provide defensive appeal, while supply disruptions from the Iran conflict enhance its oil leverage.
Bottom Line
For investors looking to surf the oil wave with a margin of safety, Talos and Patterson-UTI offer the deepest discounts to fair value—despite their recent rallies. Northern Oil & Gas, meanwhile, delivers a blend of growth, yield, and the best financial health in this trio.
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Disclosure: This is not financial advice. Always conduct your own research.
At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF, and the Invesco QQQ Trust ETF. I am also long on the Technology Select Sector SPDR ETF. I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies’ financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.
-1024x683.jpg "Strait Outta Hormuz: Getting the Iran Oil Story Straight")
