By Darnell Brown
I took a look around the energy space and uncovered six stocks that I think are must-own names. Here they are plus some commentary on each.
ATP Oil & Gas (ATPG) is an energy company that engages in the acquisition, development, and production of oil and natural gas properties in the Gulf of Mexico, the United Kingdom, and the Dutch sectors of the North Sea. It has a market cap of $796 million and a P/E of -1.97. The company reported a first quarter 2011 earnings loss of $119.55 million. The company has lost money in its last eight quarters. Also, ATP Oil & Gas has a three-year sales growth of -20%.
ATP Oil & Gas has traded in a 52-week range of between $9.04 and $21.40. The stock is currently trading in the middle of its trading range at $15.50. The stock price is below both its 50-day and 200-day moving averages. This company’s earnings and stock price have both have shifted downward in no small part to British Petroleum's (BP) difficulties in the Gulf last year; however, production and earnings forecasts show a reversal in that trend. I would have to see some good news before I would consider buying this stock.
Exxon Mobile (XOM) engages in the exploration and production of crude oil and natural gas and manufacture of petroleum products, as well as transportation and sale of crude oil, natural gas, and petroleum products. With a market cap of $4,411.97 billion, Exxon Mobil is one of the largest companies in the world. This is a dividend stock that has really performed. Over the last 10 years, this stock has given its shareholders an annualized return of 9.6%. The company is expected to earn $8.28 per share in 2011 and $8.85 per share in 2012. This is quite an increase from a $6.22 per share earned in 2010.
Over the last 52 weeks, Exxon Mobil has traded between $57.60 and $88.23. The stock is currently trading at $83.63 towards the high end of its 52-week range. Exxon Mobil is one of the market’s bellwether stocks. I would recommend this stock to anybody.
Seadrill Limited (SDRL) is an offshore drilling contractor that provides offshore drilling services to the oil and gas industries worldwide. It also offers platform drilling, well intervention, and engineering services. Seadrill Limited should benefit from the lifting of the US ban on deepwater drilling in the Gulf of Mexico. In its latest quarter, Seadrill’s profit grew 247%. In the last three quarters, profit growth has averaged 71%. In its latest quarter, sales grew 30% to $1.11 billion. The company pays hefty dividend that yields 8.7%, and has P/E ratio of 8.4.
Seadrill Ltd has traded in a 52-week range of between $20.36 and $38.49. The stock has performed well and is currently trading at $34.98 towards the top of its 52 week range. I like this stock because the company has strong growth and pays a hefty dividend.
Chesapeake Energy (CHK), together with its subsidiaries, produces natural gas in the United States. The company focuses on discovering, acquiring, and developing conventional and unconventional natural gas reserves. Chesapeake Energy has a market cap of $22.14 billion and a P/E of 12. In the past 52 weeks, shares of Chesapeake Energy have traded between $19.68 and $35.95. The stock is now trading near its 52-week high at $33.32. The stock is currently above its 50-day moving average of $29.94 and its 200-day moving average of $28.36. The first quarter earnings for Chesapeake Energy were $-205 million. The loss was due to a one-time charge of $1.2 billion.
The consensus of the analysts who are following the company think that earnings will do better in the second quarter and have been rating the stock as a buy, market outperform or overweight. I think the stock is in an upward trend and with a P/E of 12 the stock is not overpriced.
Transocean Ltd. (RIG) is based in Switzerland. The company provides offshore contract drilling services for oil and gas wells worldwide. It is the world’s largest offshore drilling contractor. Transocean has a market cap of $20.44 billion and a P/E of 15. The company reported first quarter earnings of $310 million. This was down from the first quarter earnings of $677 million in 2010. Over the last 52 weeks, the stock has traded between $44.30 and 85.88. The current price is $64.02.
Transocean is one of the largest energy companies in the world; because of its position of strength and the high price of oil, it is in a good position to sell its services. Now that Transocean has gotten beyond the Gulf of Mexico oil spill disaster, I expect that its rig count will go up and so will profits. This stock also has the added attraction of a newly offered dividend of $0.79 per share.
Range Resources (RRC) is an independent natural gas company that engages in the acquisition, exploration, and development of natural gas properties primarily in the Appalachian and southwestern regions of the United States. Range Resources has a market cap of $10.11 billion and a P/E ratio of 111. The company earnings increased by 6% in the first quarter while sells dropped by 37%. In spite of the mixed earnings picture, the stock has done remarkably well. The stock is up 11.61% year to date. The stock traded in a range of $32.95 to $62.95 over the last 52 weeks, and is now trading at $62.95, its 52-week high.