The market outlook for the oil and gas sector is estimated to experience an uptrend. Therefore, many investors have started buying the prominent oil stocks at the current market price with a long-term perspective. However, the oil and gas sector also comprise of stocks belonging to independent and small exploration companies, which have to be looked into for investment. The following stocks are essentially such stocks to be purchased from short to a medium term perspective Market trends in the oil and gas sector should certainly be followed, but with caution.
Plains Exploration & Production (PXP) is one of the prominent independent oil and gas providers engaged in exploration, extraction and other like activities pertaining to oil & natural gas. The current market value of the stock is around $39, trading within its 52 week range between $41.96 to $20.25. Having market capitalization of around $5.56 billion, the company has a strong growth prospect along with stable capital reserves. Although its Eagle Ford shale project has been underestimated by the investors, the company is expected to generate higher revenues from its organic drilling inventory. With a price earnings ratio in the multiples of around 59.7, 2012 is estimated to be good for the company for generating returns close to 19%. Being partnered with EOG resources, enhances future prospects of the company even further. More so, with the expected boom in the oil and gas industry, Plains Exploration & Production could reach a target of $45 within six months from its current levels. In that context, I would recommend one to purchase the stock at the current levels, from a medium to long term perspective.
Ultra Petroleum (UL) has some of the best assets in Pennsylvania, and Wyoming with Marcellus Shale and Pinedale Field in its asset portfolio. The company is a small and independent producer of oil who is also engaged in the business of exploration in certain prime locations of North America. The current market price of Ultra Petroleum is around $23, trading within the 52-week highs and lows of $51.20 and $23.32. With the market capitalization of $3.61 billion, its earnings per share are $2.32 while the price to earnings ratio maintained at around 10.30. The primary highlight of Ultra Petroleum Corporation remains in the company's land acreage that it owns, from which a production growth of double-digits can be well estimated. Considering the company's estimated 2012 earnings before interest, taxes, depreciation, and amortization at $955 million, the current market rate of the stock is approximately six times cheaper. In my opinion, the stock is good for purchasing at the current levels. Apart from the positive market outlook of the oil and gas sector in 2012, there are certain other catalysts which could act as essential drivers of the stock from its current price level. Its Pinedale region could see efficiency in drilling operations, whereas its Niobrara could achieve better outcomes, as a result of vertical drilling operations. In a nutshell, the company's efficient use of its resources as well as proper implementation of operations in oil drilling and activities pertaining to production of oil, can give a positive thrust to the company's stock from its current levels. I would recommend buying Ultra Petroleum Corporation for a long-term range, from its current market price.
As one of the gas utility providers, Energen (EGN) is currently trading at around $49. With a market capitalization of around $3.55 billion, the company enjoys a twelve trailing months earnings per share of $3.59. Depicting a price to sales ratio of $2.39, price to book ratio of approximately $1.46 and a price earnings ratio of around $13.70, Energen Corporation is a descent buy at current levels, especially for investors high dividend payouts. The company's beta ratio is around 1.17, with 1.14% as the dividend yield. Moreover, the company has raised its dividends by approximately 3.70%, and for a consistent period of 30 years Energen Corporation has paid dividends. Apart from its descent fundamentals, I would certainly recommend to purchase this stock at current levels, with a medium to long term perspective.
Rosetta Resources (ROSE) is currently trading at around $50, within its 52-week highs and lows of $58.04 and $30.42. Rosetta Resources Inc. has its principle projects in Colorado, California and Texas, for carrying on its oil & natural gas business. Having its 50 and 200 day moving average of $45.79 and $45.75 respectively, the company has estimated 2012 earnings per share of $3.58 versus its 2011 estimated earnings per share of $1.98. In my opinion, any assets owned in America face lesser political risks than oil related assets owned in the Middle East or Africa. Rosetta Resources Inc. owns assets in South Alberta and Texas, which includes its large acreage of land in the liquid rich Eagle Ford basin. Its production is estimated to be around 13 to 16 million barrels per square mile for 2012, which in consideration of its 300,000 net acres of land in South Alberta would mean 6.5 billion barrels of oil also, the fact that the company's asset base in the business of oil and gas production and exploration, operate in full capacity. In relation to the company's market capitalization of around $2.60 billion, the production capacity as estimated for 2012 looks lucrative, which could taken as an essential parameter in one's decision for investing in the company. I would recommend buying the stock at its current market price, with a short to medium-term perspective.
Penn Virginia (PVA) engages in drilling of oil and natural gas. Currently trading at around $4, the stock is near to its 52 week low of $4.21. Facing equipment shortages, the company failed to meet its production targets for natural gas. Moreover, its gas extraction is carried out by hydraulic fracturing modes, which stir controversy in its usage. Although no legislations prohibit its use, the method of extraction ought to be modified in the interest of its investors. The last two years for the company has been turbulent, where the company had to sell assets and also pay nonrecurring charges due for the same. However, the company has consistently managed to pay dividend yield of 4 % per year. The company's future prospects are solely based upon the rise in demand for domestic oil. In my opinion, as the company has sought new avenues of liquid drillings, performance will definitely improve. Moreover, improvement in performance will garner an uptrend in stock. Further, Penn Virginia Corporation plans to restructure its debt levels as well as improve its cash spending. At the current market price, I would recommend to purchase the stock with a short term perspective.
About the author:I'm mostly interested in income investing using dividends, preferred stocks and other debt instruments, and pair trading.
I fundamentally analyze every business from the top down.
In my personal life, I have a strong Jewish faith and enjoy playing Scrabble and entrepreneurship.