Chesapeake Energy Corporation (CHK) is the second leading natural gas producer in the U.S. The company is engaged in varied oilfield services inherent in its vertically integrated model. As a producer of natural gas, Chesapeake Energy Corporation depends on its technical organic capabilities to increase the value of its reserves and production. Moreover, the company has made gains by hedging its oil and gas production, as and when opportunities arise. The assets of the company get compactly located onshore in the U.S. Like every other oil stock, weakening in natural gas prices also impacted Chesapeake Energy Corporation. The current market price is around $22.30, trading within its 52 week range of $22 to $35.95. The earnings estimates for 2011 reflect $2.82 per share, whereas the company's annual dividend yields are around 1.5%. However, one has to understand that Chesapeake Energy Corporation has a strong presence as a natural gas producer, unlike many of its contemporaries in the oil and gas sector which are utility firms.
In my opinion, Chesapeake Energy Corporation appears cheap, trading at multiples of 11.9 times its past earnings, and at 10.2 multiples of its forward earnings. An upward trend can certainly be found in the company's stock valuation, especially as 2012 market outlook for oil and gas sector looks very positive. The company has succeeded in reducing its leverage and other cash deficits by $2.2 billion by its issue of preference shares. Some of the projects of Chesapeake Energy Corporation include - the Haynesville, the Barnett Shale, Bossier Shale, the Marcellus Shale, the Eagle Ford Shale and the Fayetteville Shale. More recently, the momentum has started to favor Chesapeake Energy Corporation with 1/3 position in its Eagle Ford Shale project to have taken by China. If the company's 2012 multiples increase to 14 times its earnings, there could be an upward swing of around 44% to be seen in the stock value from the current levels, wherein the company's earnings per share can translate to around $2.30. In my opinion, I see this stock as a buy at its current price level.
El Paso Corporation (EP), with a share price hovering around $27, is very appealing for investors who want to enter the oil and gas sector. The company has a market capitalization of $20.71 billion, and has consistently paid dividends every quarter since March 2002. El Paso Corporation owns the largest interstate natural gas pipeline system in North America. It has gained strong momentum in 2011, as the announcement of a merger with Kinder Morgan (KMI) resulted in returns of 82%. In my opinion, El Paso Corporation is an excellent investment
opportunity at its current market price.
Cabot Oil and gas Corporation (COG) is an oil and gas exploration company based in North America. The company has potential to grow by 50% over the next five years, due to its large stake in Marcellus (approximately 200,000 net acres), coupled with its ability to put resources into new energy markets. The company's forecasted earnings per share shows an increase of approximately 51% in 2012, followed by 89% in 2013. The company's market capitalization of $8.5 billion, along with $600 million operating cash flow, makes Cabot Oil and gas Corporation a reasonable buy at its current price level, which is currently hovering around $36. However, one has to take caution in doing thorough research before investing in this stock, as it seems, in my opinion, to be highly driven by news. I will hold off on buying this stock for now.
Whiting Petroleum Corporation (WLL) is a Denver based independent oil and gas company operating in the production, exploration, development and acquisition of oil and gas. Currently, shares are hovering around the $49 mark, within a 52 week range of $28.87 and $75.91. The company has a market cap of $5.23 billion, with its 117.4 million shares floating in the market. The company's price to earnings ratio is around $18, while its trailing twelve months earnings per share is at $4.17. The company's five year annual growth rate is expected to be 22.9%. In my opinion, at its current share price, the company delivers good value along with good growth prospects. Furthermore, its price to earnings ratio is reasonable, coupled with the company's growth in revenue, production and earnings. The positive outlook for the oil and gas sector will be profitable for the company. In my opinion, the stock should be bought on dips to the low $50's.Forest Oil Corporation (FST) is an independent oil and gas company currently trading around $14, within its 52 week range of $8.88 and $40.23. Having a price earnings ratio of around $11.20, 200 day moving average of around $16.70, and market capitalization of around $1.57 billion, I would also recommend this stock to be purchased on dips. My basis for recommending this stock, along with the positive outlook in this sector, lies in the company's solid asset base in Granite Wash, Deep Basin (Canada), and Haynesville, from which the company is sure to regain momentum in the near future. Also, the merger with Mariner Energy is another key factor that will likely create an upswing. I will buy on dips to the upper $13 range.