by Jack Fuller
Oil prices have hit U.S. energy companies hard recently, causing a 2.90% plunge for the entire energy sector the other day. Despite uncertainty in oil prices, we think the following companies at least deserve a look considering their growth potential.
Stone Energy Corporation (SGY): This Louisiana-based firm is an independent oil and gas firm involved in the acquisition and operation of oil and gas properties in the Gulf Coast Basin. Fluctuations in oil prices have hit many oil explorers hard, and Stone Energy was one victim among many. Share prices fell 5.08% to $31.22 on Tuesday, compared to an overall plunge of 2.90% for the entire energy sector. While price drops weren’t good news for those currently invested, the current share price presents a good opportunity to grab SGY at a bargain. Research analysts at Rodman & Renshaw rated SGY an “outperform”, while Beacon equity research named SGY one of its five “bargain bin” energy stocks. We expect SGY to recover from the oil price pullback, and share prices should increase in the coming months. SGY currently trades at $32.53 with an EPS of 1.99 and 15.61 PE Ratio.
Hercules Offshore Inc. (HERO): As its name would indicate, this offshore drilling company takes on projects of Herculean proportions, utilizing a variety of jackups, barges, and liftboats to focus on shallow-water projects in the Gulf of Mexico. The stock is currently attempting to rebound off of its 50-day moving average after a one-week pullback following a 52-week high of $6.99. The drop comes after an announced investigation by the SEC and Department of Justice concerning possible violation of securities laws by Hercules and possibly illegal company activities. This stock would have been one two watch considering the rise of its share price, but potentially illegal activities make this one hero that we wouldn’t choose until the situation is cleared up. Click here for the company’s drilling permit update. Shares trade at $5.40 at the time of this writing.
Delta Petroleum Corporation (DPTR): This small oil and gas firms concentrates operations in the Rockies and Texas, and as of 2007 had 375 billion cubic feet of natural gas reserves. Delta sits on a vast region of untapped resources; it had only developed 2% of its 871,000 acres by the end of 2010. Those untapped reserves make us hopeful on future prospects for the company, but recent financials don’t paint a great picture. While revenue increased in the last quarter by .05% to $36.41 million, Delta posted negative net income and -$31.54 million in cash flows from operations, considerably lower than the -$25.96 it posted the previous quarter. Shares trade at $.88.
ATP Oil & Gas Corporation (ATPG): ATP operates in the continental shelf on the Gulf of Mexico, with 75 blocks, 53 platforms, and 147 dedicated towards the acquisition, development, and production of natural gas and oil. ATP operates many attractive oil and gas reserves, but has managed to acquire them without much competition from larger firms. The $940 million company’s share prices surged last week when it won its second deep-water permit to complete its #2 well at Green Canyon Block 300 after encountering a gas reservoir. Beacon rates ATP a “hot stock to watch”, and we’re inclined to agree. For our full valuation of ATPG, click here. Shares trade at $16.65 at the time of writing.
SandRidge Energy Inc. (SD): SandRidge operates 650,000 acres in the West Texas Overthrust, with 85% of production weighted towards natural gas. SandRidge’s stock price has risen dramatically year over year to $11.71, and national shift towards natural gas could help drive share prices in the next few years. However, SD carries a large amount of leverage compared to the average company in the industry, and investment needs means SandRidge will require outside financing. For our full valuation of SandRidge, click here.
Kodiak Oil & Gas Corp. (KOG): Like the rest of the energy sector, oil prices hit Kodiak hard in recent weeks, causing a 6.19% fall in share price on Tuesday, bringing it to a closing price of $6.21. Kodiak’s 3.42 beta value makes it very reactive to the market index, and its market price is nearly 6% lower than its 50 day moving average. Despite the temporary setbacks, Kodiak remains undervalued with a 1-year EPS growth of 1,053.33%, and projected 1 year EPS growth of 122.64%. Kodiak remains a stock to watch, and were bullish on its prospects provided oil and gas prices recover from their current levels.
GMX Resources (GMXR): GMX Resources is an oil and natural gas production company based out of East Texas. GMX concentrates most of its drilling in the Haynesville Shale but recently added oil exploration in the Bakken formation in North Dakota and the Niobrara formation in Wyoming to diversify its holdings. Natural gas prices hit GMX hard at the end of 2010, causing a reported net loss of $149 million. Stocks fell as low as $4.20 on February 15th of this year, but share prices have recovered a bit, hitting $5.69 yesterday. Weaker performance than expected in late March saw many analysts downgrade the stock, but we expect GMX to improve once gas prices recover. For our full valuation of GMX, click here.
Royale Energy Inc. (ROYL): This San Diego headquartered energy firm focuses on the development, acquisition, exploration, and production of natural gas and oil in the Rockies, Texas, and California. We have many reasons to be optimistic on Royale, including stock performance, impressive earnings per share growth, and growth in net income. The only worrying prospect with the company is revenue growth, which has not shown the same strength as other financial measures. We still think Royale is one to watch, but we would keep it a hold until it can show some improvement in its revenue streams. Royale trades at $5.18 at the time of writing.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.