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5 Oil & Gas Picks for 2012

March 23, 2012 | About:

With the oil and gas sector looks positive for 2012, investors have started selecting stocks for their oil and gas portfolios. In choosing stocks in the oil and gas sector, one does not necessarily have to purchase big oil companies. Rather, it would make a better investment sense if one also chooses small or medium-sized companies pertaining to the arena of oil and gas exploration. In that context, suppliers of oil and gas equipments cannot be avoided in one's oil and gas portfolio. The following are independent companies engaged in oil and gas exploration, which can be purchased at their current market price.

Crimson Exploration (CXPO) is an independent oil and gas provider for crude oil and natural gas. As an independent oil and gas provider, the company carries out crude oil as well as natural gas exploration, exploitation and similar other functions, primarily in the regions of Southwest Louisiana, Colorado, East and Southeast Texas, and Colorado. The current market price of Crimson Exploration is around $3, within its 52-week trading range of $2 and $4.45. The market capitalization of the company is around $135 million. The company's book value is around $4.

I like this stock primarily on its potential for an upswing, on any positive momentum seen in the oil and gas sector. Also, this company has shown significant increase in its average liquid production, in the past years. Moreover, its acreage position in the Eagle Ford Oil Shale cannot be ruled out. Considering the 2012 capital expenditure budget that the company plans to spend, Crimson shows a fairly descent growth ratio of around 23%, as compared to the companies within the peer group. The company has forward price earnings of around 272.

Double Eagle Petroleum (DBLE) engages in exploration and production of oil and gas on an independent basis. The current market price of the company is around $7, trading within its 52-week range of $5.51 and $12. The market capitalization of the company is around $81 million. The company has its reserves mostly located in the Pinedale Anticline and the Atlantic Rim in the state of Wyoming. The company occupies nearly 70,000 net acres of land for drilling purposes. Apart from the Whiskey Buttes and the Madden Deep in Wyoming, coupled with the Table Top Unit in Utah, approximately 12 miles of underutilized pipeline assets are owned by the Double Eagle Petroleum Company.

Although most of its resources are natural gas reserves, the company's Niobrara acreage has the potential to explore oil. At its current market price, investors can purchase the stock for the short-term or for a hedging strategy.

The company shall certainly gain momentum on any positive market sentiments attracted by the oil and gas sector. The investment in the company will certainly reward those who seek high yields from the energy sector, better than the yields rendered by its competitors like Exxon Mobil (XOM). Moreover, natural gas as one of the principal energy source of the future cannot be neglected.

Pioneer Natural Resources (PXD) engages in exploration and production of oil and gas in the regions of United States, Tunisia and South Africa. The current market price of the company is around $115, within its 52-week trading range of $58.63 and $119.19. With earnings per share of around $7, the company has market capitalization of around $13.40 billion. The price earnings of the company is around $16. The company's sale to assets ratio has increased from 0.06 to 0.09, and an increase of over 200% can be seen in its quarterly revenue growth. The prime assets of the company lie in facilities situated in the regions of South Africa and United States. The company has seen an increase of around 34% in its net profit margin on a year-over-year basis, as compared with the increase shown by its competitors like Total SA, BP Plc and Chevron.

High commodity prices as well as exploration of proven resources can catalyze stronger performance for the company. Also, the company is making plans from its asset base in Raton and Spraberry field to form two master limited partnerships. Pioneer indulges in share repurchase program, which enables the company to generate a free cash flow. The company's share repurchase program also renders liquidity to its investors.

Weatherford International (NYSE:WFT) engages in supply of equipments required for drilling and exploration of oil and gas, along with rendering its services to companies involved in operations pertaining to oil and gas. The current market price of the company is around $16, trading within its 52-week range of $10.85 and $28.11. The company's market capitalization is around $12.40 billion. The stock is currently trading near to its 52-week high.

The company has strong growth potential especially where the demand for oil exploration is expected to rise even further. Due to the increase in the global population, oil prices will continue to rise, which would create further demand for drilling and oil exploration activities in newer locations. As an equipment supplier and service provider to such oil drilling and exploration companies, Weatherford should's performance should excel in tandem with the positive momentum of the oil and gas sector. The company demonstrates strong growth potential in the regions of South America, Asia and Russia.

In terms of long-term growth rate for the next five years, the company ranks a solid fifth amongst its industry peers such as PetroFac, Exterran Partners, and Secure Energy. The company is well known for its research and development base, as well as its strategic acquisitions over the years.

Halliburton (NYSE:HAL) engages in exploration and production of oil and natural gas. The current market price of the stock is around $38, within its 52-week trading range of $27.21 and $57.77. With earnings per share of around $3, the price earnings of the company is around $12. The market capitalization of Halliburton is around $35 billion.

An expected increase in the global drilling operations, due to increase in gasoline prices will certainly benefit the company in the current fiscal year. The company's earnings estimates for 2012 and 2013 are around $3.90 per share and $4 per share respectively.

The company's dividend rate is 36 cents per share, which is around 1% dividend yield. However, this company should not be looked at necessarily as an dividend investment. The company comes seventh by market capitalization amongst the other exploration companies operating in the oil and gas sector. The company has a good global distribution network, along with a well-integrated service offering. The company has shown an increase of around 38% in its 2011 revenues, as compared to its 2010 revenues. The company is trading below its 52-week high and should be near its high end with any positive momentum in the oil and gas sector.

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Rating: 3.2/5 (13 votes)


Vgm - 5 years ago    Report SPAM
With all due respect, I'd suggest now is not the moment to be buying PXD. That time was some six months or a couple of years ago. It's essentially at an all time high. Southeastern was a major holder and sold about a year or so ago based on valuation similar to today's.

I'd humbly suggest adding Exco (XCO) to your list. It's been beaten down around 65% in the past year and arguably represents strong value now. Wilbur Ross is a major (13%) holder and joined the Board a couple of weeks ago. He has been buying all the way down. He was on CNBC a couple of days ago and expressed his view that the fundamentals behind nat gas, and XCO in particular, are still in place, though they will take time to play out. He stated he is "very bullish" on XCO long term.

Disclosure: long XCO (and long Wilbur Ross!)

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