Pioneer Natural Resources (NYSE:PXD), Newfield Exploration (NYSE:NFX), Rosetta Resources (Nasdaq:ROSE), Range Resources (NYSE:RRC) Favored by FBR

FBR Capital sees the margin challenge facing the natural gas sector as either being solved by lower cost structures or higher prices. With their belief it'll be higher prices which will result from the challenge, they see companies like Pioneer Natural Resources (NYSE:PXD), Newfield Exploration (NYSE:NFX), Rosetta Resources (Nasdaq:ROSE) and Range Resources (NYSE:RRC), who all have "platforms with strong technical expertise and premium acreage and leasehold positions," as strongly positioned to take advantage of it.

FBR said, "We believe that current operating margins are insufficient to incent the required level of shale gas investment needed to balance the market beyond 2011. As such, either cost structure needs to adjust materially lower or natural gas prices need to go higher for margins to become investable. As we do not see an abatement of service costs in the near future, we believe natural gas price increases will have to provide the margin improvement. Therefore, we are raising our 2H11 forward natural gas price forecast to $5.50/Mcf from $4.50/Mcf. On the crude oil front, we are in general agreement with the NYMEX futures price curve, the strength of which we believe reflects the lack of any new, material, long-term supply sources, rebounding demand, a tenuous outlook for the U.S. dollar, and geopolitical risk. Our investing focus, however, remains agnostic to the near-term direction of commodity prices and instead is oriented toward secular themes (NAV growth potential via investing in low-cost oil and gas shale growth, deepwater subsalt exploration, and international exploration; combined, we term this secular theme of reserve growth as the “real” energy super cycle). As such, we would remain buyers of platforms with strong technical expertise and premium acreage and leasehold positions. In this context, we heavily favor Pioneer Natural Resources Company (Outperform), Newfield Exploration Company (Outperform), Rosetta Resources Inc. (Outperform), and Range Resources Corporation (Outperform)."

Pioneer was trading at $85.34, up $0.28, or 0.33 percent, as of 12:45 PM EST. Newfield Exploration was trading at $71.12, up $0.11, or 0.15. Rosetta Resources was at $36.12, down 0.43, or 1.18 percent. Range Resources was trading at $43.19, up $0.48, or 1.12 percent.