Wells Fargo Says These 2 Energy Stocks Could Heat Up in 2026

The energy sector has been drawing investors in since the first commercial oil wells went into the ground in the mid-1800s. Yet, today's landscape is far more complex than simply backing traditional oil and gas drillers. The sector is being reshaped by competing forces – the momentum behind decarbonization and the economic realities of cost, infrastructure, and regional demand.

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Governments and corporations continue to push for lower emissions and greater adoption of solar, wind, and other renewables. But at the same time, energy choices still depend heavily on local circumstances such as resource availability, existing grids, electricity costs, and industrial demand. That tension is likely to define how the sector evolves through the decade.

For investors, this means that there are plenty of sound opportunities in energy stocks for 2026 – but due diligence is in serious requisition. The key points to look for: idiosyncratic exposure to local supportive factors, and upcoming catalysts.

In his latest industry report for Wells Fargo, analyst Sam Margolin has taken note of this situation – and has gone on to make some solid recommendations for investors.

"We have observed Energy investor demand for idiosyncratic, uncorrelated, and catalyst-rich stocks. In that vein, we launch OW on California Resources (NYSE:CRC) and Tamboran Resources (NYSE:TBN), both possessing unique asset mix and several catalysts lined up for 2026," Margolin writes.

And Wall Street seems to agree: both stocks carry Strong Buy consensus ratings, according to TipRanks' database. Let's break down the pair and explore what makes these two Wells Fargo picks potential standouts heading into next year.

California Resources

We'll start out on the West Coast, where California Resources has built a solid position among its namesake state's independent exploration and production companies. California Resources is a major holder of mineral rights in the state, and has built a portfolio of productive conventional oil and gas plays in the San Joaquin Basin, the Ventura Basin, the Los Angeles Basin, the San Ardo Field, and the Sacramento Basin. The San Joaquin holdings are – by far – the company's largest, accounting for 81% of California Resources' estimated proved reserves at the end of last year.

The State of California, as a whole, is one of the nation's major oil and gas production regions. Last year, California ranked #8 among the 50 states in crude oil production, and #3 in crude oil refining capacity. California Resources provides a large piece of that pie, and in both the second and third quarters of this year produced 137,000 barrels of oil equivalent per day (137 Mboe/d), with approximately 78% of that total being crude oil.

In addition to its oil and gas business, California Resources has staked out a position in the state's decarbonization efforts. The company launched the Carbon TerraVault, or CTV, in 2021, and under this project it provides services in the capture, transport, and storage of carbon dioxide – carbon capture and storage (CCS). The project includes developments in direct air capture plus storage (DAC+S), which involves capturing CO₂ from industrial sources and injecting it into underground reservoirs for permanent storage. The company is partnering with Brookfield Renewable in a joint venture to develop CCS opportunities. The first of these developments is scheduled to be a reservoir in the company's Elk Hills Field.

On the financial side, California Resources reported a revenue miss and an earnings beat in its last reported quarter, 3Q25. The total quarterly revenues, at $855 million, were down more than 36% year-over-year and missed the forecast by $32.5 million. At the bottom line, the company reported a non-GAAP EPS of $1.46. While down from the $1.50 reported in 3Q24, it was up significantly from the $1.10 reported in 2Q25 – and it was 19 cents per share better than had been expected. The company's free cash flow rose quarter-over-quarter, from $109 million to $188 million.

The Wells Fargo take on CRC stock is ably set out by analyst Margolin. The 5-star oil sector expert writes of this California company, "We believe CRC shares are trading right at PDP value with no value embedded for power or CCUS. We believe our treatment of power contribution margin and CCUS is adequately conservative, capitalizing on Elk Hills capacity payments in 2026. In CCUS, CRC has potential permits for ~325MM tons (8MM tpa over 40 years) within a market TAM of ~90MM tpa in Central and Northern California regions. CCUS monetization can take many forms, including credit sharing with customers within 'green' and 'blue' product categories. In our build, we contemplate a streamlined revenue stream where CRC takes a comparatively small share of CCUS credit value and also contributes lower capital."

Margolin rates this stock as Overweight (i.e., Buy), and sets a price target of $58 that suggests an upside this coming year of 21.5%. (To watch Margolin's track record, click here)

Overall, the Strong Buy consensus rating on California Resources is unanimous, based on 10 positive analyst reviews. This stock is currently trading for $47.74 and its $66.13 average target price indicates room for a 38.5% gain on the one-year horizon. (See CRC stock forecast)