By Paul R. La Monica

Oil stocks are a riddle wrapped in a mystery inside an enigma, but Atlas Energy Solutions stock looks like a winner no matter the answer.

The energy sector shouldn't be doing this well. It's the best-performing sector in the S&P 500 this year, despite crude prices sliding a bit. The return of President Trump to the White House has boosted hopes that the federal government will continue to push for increased U.S. oil production and less on renewable sources of power, something that could lead to a glut of unused oil -- and lower prices still. Perhaps the markets are sniffing out something the headlines aren't -- or maybe the energy sector is just getting ahead of itself.

Atlas Energy, a logistics company that runs a 42-mile-long electric conveyor belt that brings fracking sand from Texas to New Mexico in the Permian Basin, should benefit either way. The 'Dune Express,' as the belt is known, will keep running no matter the outcome of President Donald Trump's energy policy.

"It's drill, baby, drill all over again," said George Young, a portfolio manager with Villere & Co. who owns the stock. That should be good for Atlas as energy companies will need the fracking sand to keep drilling operations up and running, especially if domestic oil prices continue to stabilize as Trump threatens more tariffs on countries importing oil from Venezuela.

Atlas Energy, which went public in 2023, is more than just the Dune Express. It also manages a fleet of more than 120 trucks to deliver so-called proppants -- material such as sand that helps keep cracks in the ground created by hydraulic fracking open, to oil and natural gas companies in the region. But the Dune Express helps keep trucks off the road and can deliver sand to drillers more quickly and efficiently.

In fact, the Dune Express, which was built in 2023 and 2024 and became operational this January, should wind up being a more efficient and lower-cost way to deliver proppants to energy companies, writes Derek Podhaizer, an analyst with Piper Sandler. That will likely lead to market share expansion and higher profit margins. Atlas is also increasing its use of autonomous trucks, which should also help to usher in "a new era of efficiencies," he added.

Atlas Energy is making moves into other parts of the energy logistics industry. It purchased privately held Moser Energy Systems, which makes power generators used by drillers, in February. The deal gives Atlas "entry into the delivered power business, diversifies the company's markets and extends its customer reach," writes Stephens analyst Mike Scialla. He's bullish on the long-term prospects for Dune Express as well, noting that Atlas "is poised to disrupt the Permian sand market and lower delivery costs as the Dune Express and driverless trucks ramp this year." Scialla has a $29 price target on the stock, more than 55% above its current level.

Earnings per share are expected to increase nearly 35% this year and analysts are predicting a 20% jump in sales. Villere's Young said he thinks the stock is a great value, trading at just 15 times earnings estimates for this year. He also likes the fact that Atlas Energy stock yields more than 5%. It also doesn't hurt to see founder and executive chair Ben "Bud" Brigham recently buy shares.

Young added that Brigham has founded several other energy companies that were subsequently sold to larger firms. They include the 2017 sale of Brigham Resources to Diamondback Energy for $2.55 billion and the 2022 sale of Brigham Minerals, which went public in 2019, to Sitio Royalties for $4.8 billion. Atlas could be a takeover target too, Young says, and deserves a higher multiple because it.

Investors shouldn't rule out history repeating itself. Brigham is the largest shareholder of Atlas, with about a 12.5% stake. If Atlas gets sold, Bud, and the company's shareholders, could strike it rich.

You might even call it a gusher.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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March 27, 2025 11:11 ET (15:11 GMT)

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