The positive trend expected in the oil and gas sector, is also going to reward lot of independent oil drilling companies or such companies actively involved in oil exploration and extraction processes. These companies use specialized techniques in providing new oil reserves all over the world. Innovative usage of extraction techniques, new oil shale discoveries, and optimum use of resources, benefit the companies in generation of their revenue growth. There are several companies engaged in the exploration of crude oil and its variants, who have suffered in the past two years due to volatility in the oil and gas sector. Therefore, lot of stocks in the sector has fallen to a great extent, nearing their lows. One should select certain independent oil exploration companies who have a good prospect in the current year, and which look attractive at their current price levels. However, I have included one stock in the purchase of which, the investors have to use caution. Following are certain companies who specialize in exploration and oil extraction.
Newfield Exploration (NYSE:NFX) is currently trading at around $38, within its 52-week range at $77.93 and $34.41. With a price earnings ratio of around $10.50, and earnings per share of approximately $3.62, the stock is estimated to have a six month target of above $50. Having a price to equity ratio in the multiples of 10, Newfield Exploration Co. shows a huge potential in its Uinta basin resource. With a market capitalization of $5.14 billion, the company is an independent oil and gas company, having business in exploration and distribution of crude oil. In my opinion, the company's stock is trading closer to its 52-week lows. In that case, I would recommend investors to watch and invest in this stock. The stock should be purchased on dips with a short to medium term perspective. Investors have to utilize an optimal hedging strategy for investing in Newfield Exploration Co.
Denbury Resources (NYSE:DNR) plays a vital role in the oil & gas sector by carrying out activities pertaining to the exploration and acquisition of oil and natural gas. The company carries out its operations specifically in the regions of Texas, Alabama, Mississippi, and Louisiana. Denbury Resources is currently trading at around $19, within its 52-week highs and lows of $26.03 and $10.20. Its market capitalization being around 7.5 billion, Denbury Resources Inc. depicts earnings per share of around $1.29, while its price earnings ratio is around $14.80. The price earnings to growth ratio of the company is poised at approximately $0.67. The stock at its current level looks oversold to me, and is expecting a pull back. However, the reason why I would recommend one to purchase this stock at its current market price is that the stock has a relative strength index of more than 70. Hence, Denbury Resources could be looked for short to medium term investment, at its current market price.
SM Energy (NYSE:SM) is a prominent company in the oil and gas segment, engaged in the exploration, production, and other such activities involving newer technologies in extraction of crude oil and natural gas. The company has increased its operations in the Eagle Ford shale region to utilize its fullest capacity in the exploration and oil extraction process. The company has also increased its focus in the Bakken and Granite Wash basin. The strength of SM Energy Company lies in its natural gas reserves, which is significant part of company's generation of operating revenues. The current market price of SM Energy Company is around $76, trading within its 52-week range of $88.50 and $53.45. Having market capitalization of around $4.9 billion, along with its earnings per share and price earnings ratio poised at around $ 5.55 and $13.80 respectively, the stock looks very attractive to be purchased at its current market level. Its earnings per share 5-year forecasted growth are estimated at approximately 44.60%. in my opinion, SM Energy Company has to be purchased at its current market price, with a long term perspective.
Unit (NYSE:UNT) carries out its oil and gas activities in exploration, drilling, and mid-stream projects through its Unit Petroleum Company, Unit Drilling Company and Superior pipeline Corporation respectively. The three segments of the company synergize with each other, to increase liquid exposure, production and oil reserves. Unit Corporation has significant activities carried out in the Marmaton, Segno, and Granite Wash basins in the U.S. Unit Drilling Company, one of the company segments, stands as one of the prominent U.S. onshore contractors, specializing in deep drilling. Currently trading at around $47, the stock is placed within its 52-week highs and lows of $63.81 and $33.56 respectively. With a price earnings of around $12.00 and earnings per share of around $4, Unit has market capitalization of around $2.26 billion. I expect independent exploration companies, within the oil and gas sector, to perform well and will depict positive uptrend in 2012. In my opinion, Unit Corporation is good to be purchased at the current level, with a medium to long term perspective.
Halcon Resources (NYSE:HK) is an independent company engaged in the onshore activities pertaining to oil and gas properties, through exploration, and distribution of the same. Halcon Resources is currently trading at around $12, between its 52-week highs and lows of $13.35 and $1.80. With a price earnings ratio of $57, and earnings per share of around $0.21, this stock should not be purchased at its current market price. Halcon Resource's efforts in paying dividends to its investors have also been insignificant. Although an uptrend is expected in the oil & gas sector for 2012, I would not recommend buying Halcon Resources. However, one could purchase this stock on dips essentially for hedging. From a long term perspective, Halcon Resources can be avoided at its current market price.
About the author:
At Investment Underground, our editors are disciplined, independent thinkers who will inform you when to buy undervalued investments, recognize catalysts, and sell when full value is realized. We provide timely, detailed analysis of our value investing strategies and help you achieve your goals of a reduced-risk trading environment.
If you are fed up with volatile markets and manipulation that put your financial well-being in jeopardy, join us to achieve those gains you deserve without the headache.