The market outlook for the oil and gas sector for 2012 is estimated to be very positive. Therefore, certain stocks having good fundamentals, whether by their financial valuations or by the nature of solid assets owned by them, are bound to do well. With that said, competition in this sector is fierce, and price volatility is high. Strong headwinds include pressure to keep production costs low. In the following article, I will discuss five stocks with solid fundamentals in the oil and gas sector, which I believe will perform well in 2012 and are worth buying from a long-term perspective. I chose these five companies because they all show strength either through financials, acquisitions, expansion, or solid fundamentals.
Comstock Resources Inc. (CRK, Financial) is engaged in the development, acquisition, exploration, and production of oil & natural gas. The current market value of the stock is around $12.70, trading below its 52 week range from $13.69 to $33.63. Although it was estimated that Comstock Resources, Inc. would lose 23 cents per share in 2011, 2012 was suggested to be profitable for the company. Having book value of around $22.30 per share, and $17.20 as its 50-day moving average, the company is known to own solid assets, which are fully operational. The company owns around 1600 oil and natural gas wells in east and south Texas, Kentucky, Mexico and north Louisiana, of which 899 are in operations. Apart from its proved reserves of 1,501 billion cubic feet, the company's recent acquisition in the Permian Basin has enhanced its potential to produce oil equivalent of additional 178 million barrels. Moreover, the acquisition also adds 900 vertical drilling locations. As the market outlook for oil and gas sector in 2012 is optimistic, in my opinion, purchasing the stock at its current market value is fairly good. In fact, the current market value of stock purely reflects the worries of its investors, that the company may not have enough cash flow to fund its assets. The current market value is not due to the company's poor performance or any operational malfunction. The company management is firm that its internally generated cash flow is sufficient to fund its entire drilling program or any other capital expenditure needs. However, one has to keep in mind the volatility inherent in the oil sector. Thus, one has to be conservative if an investment has to be done in a oil stocks which are trading below their 52 week lows, such as in the case of Comstock Resources, Inc. Considering the fully operational assets owned by the company, any boom in the oil sector will certainly create an upswing in Comstock Resources, Inc., having potential to reach a price target of $40. In my opinion, you can purchase this stock at its current levels, for a long term range.
Cheniere Energy Inc. (LNG, Financial) has prime ownership in Cheniere Energy Partners through which it engages in the liquefied natural gas business. Currently, the company is looking forward to expand its basin facilities into import as well as export options, so as to enhance its liquefied natural gas business in a big way. The company principally operates in Louisiana, where it owns and is involved in the operations of the Sabine Pass terminal. Moreover, the Creole Trail Pipeline is owned by the company, wherein the pipeline covers the majority of U.S. infrastructure, pertaining to the marketing and development of the liquefied natural gas business. With a market capitalization of approximately $1.09 billion, the stock is currently trading at around $13.13, within its 52 week range of $3.17 and $13.28. Investors, who believe on hope of natural gas becoming tomorrow's energy driver, will like this stock. In other words, if you want to profit from this stock from its current levels, I do not see much hope. But if one believes in the ten year makeover story of the energy sector through natural gas, then buying Cheniere Energy, Inc. On dips would not hurt. Essentially, this stock is a long range perspective to initiate one's buying decision. The company however has big plans on investing $5 billion on natural gas liquefaction in order to become its biggest exporter. In my opinion, if you are a believer of the natural gas phenomenon, Cheniere Energy is the stock for you.
Swift Energy Co. (SFY, Financial) is one of the oil and gas providers involved in the development , acquisition, exploration, and production of oil & properties of natural gas. An estimate of 13.2 million barrels of oil equivalent has been the proved reserves of the company since December, 2010. The company's stock trading at around $33.41, ranges between 52 week high's and low's of $48.19 and $20.39 respectively. In my opinion, at the current price levels, the stock is still undervalued at five times lesser than its trailing operating cash flow. Considering a strong market outlook for oil stocks in 2012, Swift Energy Co. could achieve a price target of $45 in a year's time from the current levels. The stock is comfortably placed at just around 42% over its book value. Also, with market capitalization of around $1.42 billion, it could be one of the most sought after investment ideas through acquisition. I would certainly recommend buying this stock at its current levels, keeping a medium to long term perspective.
ATP Oil & Gas Corporation (ATPG, Financial) engages in the production and acquisition of natural gas. The stock is trading at around $6.80, near to its 52 week lows of $5.71. However, the company has been a consistent dividend payer for 29 straight years, with a payout ratio of around 22%. The dividend yield of the company is 2.20%, while its balance sheet is fairly conservative depicting a total cash of $11.02 billion, along with total debt of around $16.75 billion. The company plans to efficiently restructure its debt services, from its Gulf of Mexico expansion. In fact, the expansion should give a strong growth potential in 2012, accompanied by its expected increase in production. Likewise, ATP has been conservative in the past years as compared to its contemporaries. With a gross profit of $281.81 million, ATP appears to be undervalued at its current levels. With a return on equity of 26.85%, an expected turnaround in the oil and gas market outlook, and bright prospects for natural gas, I would certainly recommend purchasing this stock at its current price levels, with a long term perspective.
ConocoPhillips (COP, Financial) is one of the largest oil companies on the global front, engaged in the business of integrated energy. Currently trading at around $71.55, within its 52-week range is from $81.80 to $58.65. The market capitalization of ConocoPhillips is around $93.5 billion, whereas its price earnings ratio is around $7.9, with a dividend yield of 3.8%. ConocoPhillips is estimated to perform much better in 2012, through its individual operations, as well as benefit from its planning to use its resources better. The management of ConocoPhillips has agreed on a possible restructuring in its business operations, where a spinoff in its refining operations is awaited. Sale of its assets for business expansion will also favor ConocoPhillips in a big way. The book value of the company has increased in the last decade to approximately $66 million, depicting a growth of over 300%, which even surpasses its appreciation in capital. In my opinion, the stock of ConocoPhillips looks good at its current market price, and can be bought with a long term perspective.
Comstock Resources Inc. (CRK, Financial) is engaged in the development, acquisition, exploration, and production of oil & natural gas. The current market value of the stock is around $12.70, trading below its 52 week range from $13.69 to $33.63. Although it was estimated that Comstock Resources, Inc. would lose 23 cents per share in 2011, 2012 was suggested to be profitable for the company. Having book value of around $22.30 per share, and $17.20 as its 50-day moving average, the company is known to own solid assets, which are fully operational. The company owns around 1600 oil and natural gas wells in east and south Texas, Kentucky, Mexico and north Louisiana, of which 899 are in operations. Apart from its proved reserves of 1,501 billion cubic feet, the company's recent acquisition in the Permian Basin has enhanced its potential to produce oil equivalent of additional 178 million barrels. Moreover, the acquisition also adds 900 vertical drilling locations. As the market outlook for oil and gas sector in 2012 is optimistic, in my opinion, purchasing the stock at its current market value is fairly good. In fact, the current market value of stock purely reflects the worries of its investors, that the company may not have enough cash flow to fund its assets. The current market value is not due to the company's poor performance or any operational malfunction. The company management is firm that its internally generated cash flow is sufficient to fund its entire drilling program or any other capital expenditure needs. However, one has to keep in mind the volatility inherent in the oil sector. Thus, one has to be conservative if an investment has to be done in a oil stocks which are trading below their 52 week lows, such as in the case of Comstock Resources, Inc. Considering the fully operational assets owned by the company, any boom in the oil sector will certainly create an upswing in Comstock Resources, Inc., having potential to reach a price target of $40. In my opinion, you can purchase this stock at its current levels, for a long term range.
Cheniere Energy Inc. (LNG, Financial) has prime ownership in Cheniere Energy Partners through which it engages in the liquefied natural gas business. Currently, the company is looking forward to expand its basin facilities into import as well as export options, so as to enhance its liquefied natural gas business in a big way. The company principally operates in Louisiana, where it owns and is involved in the operations of the Sabine Pass terminal. Moreover, the Creole Trail Pipeline is owned by the company, wherein the pipeline covers the majority of U.S. infrastructure, pertaining to the marketing and development of the liquefied natural gas business. With a market capitalization of approximately $1.09 billion, the stock is currently trading at around $13.13, within its 52 week range of $3.17 and $13.28. Investors, who believe on hope of natural gas becoming tomorrow's energy driver, will like this stock. In other words, if you want to profit from this stock from its current levels, I do not see much hope. But if one believes in the ten year makeover story of the energy sector through natural gas, then buying Cheniere Energy, Inc. On dips would not hurt. Essentially, this stock is a long range perspective to initiate one's buying decision. The company however has big plans on investing $5 billion on natural gas liquefaction in order to become its biggest exporter. In my opinion, if you are a believer of the natural gas phenomenon, Cheniere Energy is the stock for you.
Swift Energy Co. (SFY, Financial) is one of the oil and gas providers involved in the development , acquisition, exploration, and production of oil & properties of natural gas. An estimate of 13.2 million barrels of oil equivalent has been the proved reserves of the company since December, 2010. The company's stock trading at around $33.41, ranges between 52 week high's and low's of $48.19 and $20.39 respectively. In my opinion, at the current price levels, the stock is still undervalued at five times lesser than its trailing operating cash flow. Considering a strong market outlook for oil stocks in 2012, Swift Energy Co. could achieve a price target of $45 in a year's time from the current levels. The stock is comfortably placed at just around 42% over its book value. Also, with market capitalization of around $1.42 billion, it could be one of the most sought after investment ideas through acquisition. I would certainly recommend buying this stock at its current levels, keeping a medium to long term perspective.
ATP Oil & Gas Corporation (ATPG, Financial) engages in the production and acquisition of natural gas. The stock is trading at around $6.80, near to its 52 week lows of $5.71. However, the company has been a consistent dividend payer for 29 straight years, with a payout ratio of around 22%. The dividend yield of the company is 2.20%, while its balance sheet is fairly conservative depicting a total cash of $11.02 billion, along with total debt of around $16.75 billion. The company plans to efficiently restructure its debt services, from its Gulf of Mexico expansion. In fact, the expansion should give a strong growth potential in 2012, accompanied by its expected increase in production. Likewise, ATP has been conservative in the past years as compared to its contemporaries. With a gross profit of $281.81 million, ATP appears to be undervalued at its current levels. With a return on equity of 26.85%, an expected turnaround in the oil and gas market outlook, and bright prospects for natural gas, I would certainly recommend purchasing this stock at its current price levels, with a long term perspective.
ConocoPhillips (COP, Financial) is one of the largest oil companies on the global front, engaged in the business of integrated energy. Currently trading at around $71.55, within its 52-week range is from $81.80 to $58.65. The market capitalization of ConocoPhillips is around $93.5 billion, whereas its price earnings ratio is around $7.9, with a dividend yield of 3.8%. ConocoPhillips is estimated to perform much better in 2012, through its individual operations, as well as benefit from its planning to use its resources better. The management of ConocoPhillips has agreed on a possible restructuring in its business operations, where a spinoff in its refining operations is awaited. Sale of its assets for business expansion will also favor ConocoPhillips in a big way. The book value of the company has increased in the last decade to approximately $66 million, depicting a growth of over 300%, which even surpasses its appreciation in capital. In my opinion, the stock of ConocoPhillips looks good at its current market price, and can be bought with a long term perspective.
