Play $100 Oil with These 6 Energy Stocks
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Assuming that the US economy continues to rebound during this period of recovery and Europe settles their fiscal concerns, now could be the perfect time to buy oil stocks. The price of crude oil dipped in the past few months thanks in part to the European debt crisis and chaos in Libya, but appears to be rising again. After a 52 week low of $76.50 in October 2011, oil has been hovering around the $100 mark recently. With these market indicators, I expect oil and gas stocks to be a desired investment throughout 2012. In the following article, I will discuss give stocks with a key competitive advantage in the oil and gas sector that are positioned for positive growth heading deeper into 2012.
Chevron Corp. (NYSE:CSX): shares have shown consistency over the past several trading sessions and are currently trading around $102, with a 52 week range of $86.68 to $110.99. The company has maintained its position as a powerhouse in the energy sector for some time. Investors can count on its diversity in services and locations in which it exploits to keep the company stable, as the company operates in both upstream and downstream segments of the production and refinement of crude oil and natural gas. With a forward annual dividend yield of 3.10% this stock should pay off well over the long term, and given the rebound in oil it has the makings of a very reliable pick. Though revenues of $236.29 billion are not as high as key competitors such as BP (BP) with $362.18 billion or Exxon Mobil Corporation (XOM) with $419.54 billion, the company’s gross margin is significantly higher at 32.09% and will keep the company in a competitive position.
Whiting Petroleum Corp. (NYSE:WLL): the stock is currently trading around $50, with a 52 week high of $75.91, and I predict that its price may reach or even surpass that high in the upcoming year. Whiting Petroleum possesses an abundance of acreage in shale basins on US soil, especially in the key areas of the Gulf Coast and Permian Basin, giving them a competitive advantage on those companies that import their oils from overseas. The company has a market capitalization of $5.89 billion and saw a net profit margin of 42.3% in the third quarter. It has a P/E ratio of 12.02 and a return on equity of 18.23% for the third quarter. Anadarko Petroleum Corporation (APC) may give Whiting Petroleum some competition, but it is likely that when oil prices start to rise there will be enough demand to go around. Based on this information, I believe Whiting Petroleum is a solid bet for the short to mid-term.
Statoil ASA ADS (NYSE:STO): Statoil is involved in the development and production of oil and natural gas in Norway, and other international locations. Statoil recently confirmed that it invested $538 million with its partners in the Visund North area of the North Sea field. The field is estimated to hold 29 million barrels of oil. I believe this investment will bring even greater profitability to Statoil. With shares are currently trading around $25 per share, prices have stayed consistently in the middle of a 52 week range of $20.12 to $29.67. The company currently has a forward annual dividend yield of 3.70%. It has return of assets of 16.40% compared to the sector’s 7.56%, and had a return on equity of 26.60% compared to the sector’s 13.55%. It is for these reasons that I expect the stock to climb steadily over the coming quarters.
Occidental Petroleum Corp. (NYSE:OXY): OXY is currently trading at around $99 per share and has all the makings of a stock that is about to take off. Strong business philosophy and a focus on long-term growth make this an interesting pick. Revenues of $22.97 billion are not as high as some of the other big oil companies, but where it lacks in revenues it makes up for it in efficiency and profitability. With a gross margin nearing 50% and a return on equity of 18.16% the company makes good use of its resources. I expect shares to increase steadily in the short to mid-term.
Royal Dutch Shell PLC ADS B (NYSE:RBS-B): Royal Dutch Shell is currently trading around $72 per share. The company had third quarter revenues of $123 billion this year, compared to $90 billion in the third quarter of 2010. Third quarter net income was $7 billion, more than doubling net income from the third quarter last year. Shell currently has a P/E ratio of 7.19. With a market cap of over $226.14 billion, expect strong stability out of one of the largest integrated oil companies in the world. A forward annual dividend yield of 4.60% makes Royal Dutch Shell profitable to shareholders. In my opinion, strong dividend payouts coupled with consistent growth make this stock a good value at current prices.
Kodiak Oil & Gas Corp (NYSE:KOG): As an up and coming corporation, Kodiak Oil & Gas is off to a great start. Shares are currently trading at around $9, Kodiak Oil & Gas could be one of the most undervalued oil and gas stocks on the market. After a consistent performance in much of 2011, Kodiak has seen substantial increases in the past few months. Much of the benefit comes from the fact that it is primarily based in the United States, capitalizing on the competitive advantage of lower costs compared to companies that import oil from overseas. Recent acquisitions in the Bakken shale basin of North Dakota have helped paved the way for Kodiak, and should continue to provide them with positive growth prospects. The recent reporting of a third quarter net profit margin of 104.46% compared to -9.66% in 2010 has sparked major investor interest. The company currently has a net profit margin of 43.77% and operating margin of 44.23%, showing its consistency in growth. With the exception of Marathon Oil Corp. (MRO), Kodiak outperforms all other competition, with its revenues equaling greater than its two biggest competitors, Double Eagle Petroleum Co. (DBLE) and Gasco Energy Inc. (GSX), combined. Kodiak Oil & Gas is well positioned for growth throughout 2012, and looks to be a solid bet for investors looking to capitalize on a young, stable performer.
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