Recent Market Weakness Presents Opportunity In The Oil Patch

Includes: CXO, PXD, WLL
by: Fear & Greed Trader


Headlines are everywhere regarding Russia/Ukraine issues and now the Iraq situation has investors nervous and worried.

Improving fundamentals amidst this market "noise" gives savvy investors a chance to add E&P oil companies to their portfolio.

Three candidates that are on my "watch list" worthy of initiating or adding to positions on further weakness.

The equity market sure had its share of ups and downs this past week, driven by nervous traders and investors with their eyes and ears fixated on every headline crossing their path.

All of this is taking place with a backdrop of improving corporate earnings and fundamentals, and therein lies one of the best environments for investors to add or initiate positions at the expense of those who are fearful over this market "noise".

This scenario now sets up nicely if you are bullish, as it is similar to what has happened in the past. Market weakness, brought on by geopolitical issues, in this case Russia/Ukraine, and now Iraq (Again), in my view, are not reasons to hit the 'sell" button. Quite the contrary, as these events do get resolved and when they do, the market will then react to what really matters.

As a testament to that, just look at how the market reacted when the "headline" came out that the Russian troops had pulled back from the Ukraine border. The rally last Friday afternoon, which wiped out the entire weekly loss on all of the major averages.

Therefore, I continue to look for opportunities that are being presented during these periods of investor jitters, to put some money to work in this secular bull market.

This article will be the first in a series that will highlight what I regard as candidates for investors to consider to help navigate the "fear" cycles we encounter in the equity market.

Today, the E & P segment of the U.S. oil sector.

Concho Resources (NYSE:CXO) , headquartered in Midland, Texas, is an independent oil and natural gas company engaged in the exploration, development, and acquisition of oil and natural gas properties, with its primary focus in the Permian Basin of Southeast New Mexico and West Texas. The company fundamentals are improving with their recent earnings report on August 7th which "beat" estimates by reporting $1.04/share versus the street consensus of $.97. The company has doubled its production in the past 3 years and this growth remains robust as indicated on their latest conference call. The shares have pulled back from their recent high of $148 on July 9th to a close this past week of $133.

Pioneer Natural Resources (NYSE:PXD), headquartered in Irving, Texas, is an independent oil and gas exploration and production company. Major operating areas include the Permian Basin, the Eagle Ford, and Barnett Combo in Texas, Alaska, and South Africa. Shares have been under pressure falling form a recent high of $233 in June to an intraday low of $201 this past week, before finally rebounding and closing at $210. A solid second quarter earnings report was met with a yawn by investors. The company beat analysts estimate of $1.28/share as it came in at $1.35/share when it reported earnings on August 4th.

Whiting Petroleum (WLL), based in Denver, Colorado, is an independent oil and gas exploration and production company. Properties and operations, located in the United States and Canada, are centered in the Rocky Mountains, Gulf Coast, and Permian Basin. The company grows through a combination of development drilling and property acquisitions. Whiting beat estimates for the 6th consecutive quarter as its strong acreage position and best-in-class operational expertise continues to deliver. On July 30th they reported $1.40/ share versus a consensus of $1.28. Shares have fared better than both and , having fallen only 5% from its high of $90 to $85/share.

Let's not forget that stocks suffer pullbacks and corrections, and that it is a very healthy component of a long-term uptrend, giving investors a chance to trim under-performing positions and buy into companies at lower prices. These stocks can surely see more weakness in the days, weeks ahead, but represent solid growth prospects for anyone with a long term perspective of the market.

In my view, these are all candidates that can be added to an investors "watch list" and are worthy of purchase on further weakness. Each company giving an investor exposure to the growing E & P energy sector here in the U.S.

All three of these companies represent improving fundamentals amidst market "noise", and in my view that equals opportunity.

Best of Luck to all!

Disclosure: The author is long CXO, PXD, WLL. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am long numerous equity positions - all of which can be seen here on my SA Instablog. It is my intention to present an introduction to these securities and state my intent and position. It should be used as a 'Starting Point' to conduct your own Due Diligence before making any investment decision.