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I think exposure to the energy sector is a must for investors in the long run. With inflation rising, energy is one of the best places to preserve and grow capital for any long term investor. For various reasons, there are a number of energy stocks that are looking like particularly attractive buys right now, so much so that I would call them dirt cheap. It has been paying off to buy the dips in energy stocks when they occur. It's very likely that the recent dip in some of these energy related names, like Syntroleum (NASDAQ:SYNM) and ATP Oil (ATPG) will reward anyone buying them now with solid gains in the near future. Here are the stocks you might want to consider now.
Syntroleum Corp. is trading for $1.35. Syntroleum develops and markets synthetic fuels. This includes diesel fuels, heating oil, aviation fuels, lubricants, naphtha, etc., and they have ability to process a range of feedstock, including vegetable oils, fats, fatty acids, and greases into synthetic distillate fuels, such as diesel fuel, heating oil, jet fuel, naphtha, and propane. Syntroleum has a joint venture with Tyson Foods, Inc. (NYSE:TSN) and operates a huge biofuels plant. This plant, which opened just late last year, has the ability to turn animal fats into renewable diesel with a capacity of about 75 million gallons.
This stock was trading for about $2 per share as recently as June 28; then Syntroleum announced a secondary offering at $1.58 per share. With the capital raise now complete, the shares are currently trading at oversold levels and should rebound shortly as many stocks do after a secondary offering is completed. Multiple insiders at Syntroleum have started to take advantage of the bargain stock price and have recently purchased more than 170,000 shares. Investor interest in biofuels should continue to grow in the future, and Syntroleum is a leader in this sector. Major companies like Honeywell (NYSE:HON) see a "boom" coming for aviation biofuels. This stock has been building a base around $1.34, and these shares could be setting up to rebound sharply, to about $1.75+ and higher still in the future.
ATP Oil and Gas Corp. is trading at $15.42. ATPG is an independent oil and gas company based in Texas. These shares have traded in a range between $8.85 to $21.40 in the last 52 weeks. The 50-day moving average is $16.48 and the 200-day moving average is $16.51. Analysts are expecting substantial growth from this company and see revenues jumping from about $762 million this year to about $1 billion next year.
The earnings estimates are for a loss of $1.38 per share in 2011, but analysts see profits of $1.86 per share for 2012. If ATPG achieves that level of profitability, these shares could jump to $30 in 2012.
ENI SPA (NYSE:E) is trading around $45.42. ENI is a major integrated oil and gas company based in Italy. These shares have traded in a range between $35.10 to $50.30 in the last 52 weeks. The 50-day moving average is $48.59 and the 200-day moving average is $43.58. E is estimated to earn about $5.32 per share in 2011 and $6.06 for 2012.
ENI is one of the least known of all the major integrated oil companies. Because of this, it is also one of the cheapest. It's also been under pressure due to the European debt crisis. In the long run, ENI is not likely to be impacted by the debt issue and shares could recover. The PE ratio is less than eight times earnings and E pays a strong dividend with a yield around 4.5%. Book value is $41.38 so these shares are trading barely above that level.
Kodiak Oil and Gas Corp. (NYSE:KOG) is trading at $6.19. These shares have traded in a range between $2.43 to $7.70 in the last 52 weeks. The 50-day moving average is $6.12 and the 200-day moving average is $5.96. KOG is estimated to earn about 35 cents per share in 2011 and 83 cents in 2012. The CFO recently bought about 16,450 shares which totals nearly $100,000.
The earnings estimates are for 26 cents per share in 2011, but analysts see profits jumping to 77 cents per share for 2012. If Kodiak achieves that level of profitability, these shares could jump significantly.
Abraxas Petroleum Corporation (NASDAQ:AXAS) is trading at $4.91. These shares have traded in a range between $2.30 to $6.16 in the last 52 weeks. The 50-day moving average is $3.96 and the 200-day moving average is $4.33. AXAS is estimated to earn about 20 cents per share in 2011 and 43 cents in 2012.
These shares have jumped up in the past couple days, so I would wait for pullbacks. At $4 or less, which is around the 50-day moving average, these shares are cheap, based on the growth potential.
Magnum Hunter Resources (NYSE:MHR) is trading around $7.42. Magnum is an independent oil and gas company based in Texas. These shares have traded in a range between $3.75 to $8.66 in the last 52 weeks. The 50-day moving average is $6.70 and the 200-day moving average is $6.70. MHR is estimated to earn about 8 cents per share in 2011 and 38 cents in 2012.
Magnum controls about 46,000 acres in the Marcellus Shale region as well as exposure to the Eagle Ford and Bakken. Oil stocks with exposure to the Bakken Range have surged. The CEO of one leading oil company says he thinks there are 20 billion barrels of oil in the Bakken. If management executes properly, there is substantial growth potential here. Insiders have been buying shares. Like Abraxas, this stock has jumped up in the past couple days, so I would wait for pullbacks to around $6.70.
Disclosure: I am long SYNM, ATPG
Source: 6 Dirt Cheap Energy Stocks