With news of a global slowdown, oil and natural gas companies that fared well during the recession are now seeing drops in share prices. We’ve identified five deeply undervalued oil and gas stocks that we believe will perform well in the long term.
Cal Dive International Inc. Co (DVR)
DVR’s gross margin is 11.29%, compared to -0.68% for Global Industries Ltd. (GLBL), Oceaneering International, Inc.’s (OII) 22.76%, and TETRA Technologies Inc.’s (TTI) 28.22%. Compared to the competition, DVR posted a trailing 12-month net loss of $309.51 million, while GLBL reported a net loss of $136.83 million, OII showed net income of $205.39 million, and TTI posted a net loss of $34.5 million. DVR shows a loss per share of $3.39 compared to GLBL’s loss of $1.20, OII’s earnings per share of $1.89 and TTI’s loss per share of $0.45.
According to this Bloomberg news piece, Whitebox Advisors LLC sold its position in DVR in the second quarter of this year for $3.4 million, which placed it on the list of “Top Sell Outs by Market Value.” According to this announcement and this list. Morgan Keegan upgraded its recommendation of DVR to “outperform” late in August. One Motley Fool analyst favors the competition, TTI, for reasons discussed here. He also takes a closer look at DVR in this article, closely considering its accounts receivable and days sales outstanding to determine if it will miss its numbers in the coming quarters. If so, the share price will fall, making it an attractive option for selling short. DVR closed at $2.82 on Thursday, September 1, which was down $0.03 or 3.09%. This was very close to the 52-week low of $2.61.
Penn Virginia Corporation (PVA)
PVA is also trading near its 52-week low, having closed Thursday at $7.57. The company reported Wednesday, August 31, that it has closed the sale of its properties in the Arkoma Basin for $30.5 million in cash, as discussed here. Management hopes the move will enhance liquidity and work with increasing cash flows to fund its capital expenditures through the end of this year and into 2012.
This Seeking Alpha article estimates PVA will deliver 60% gains in price in the coming year. According to this Investopedia article, PVA cut production in the mid continent area, putting it in the precarious position of spending more to get less. However, investors often panic and sell off holdings, which drives share price down, while failing to see the long term.
With a market capitalization of $346.46 million, PVA is much smaller than its mid and large cap competitors. Its gross margin of 74.77% compares to Cabot Oil & Gas Corporation’s (COG) 80.52%, EQT Corporation’s (EQT) 72.17%, and Range Resources Corporation’s (RRC) 82.36%. PVA shows a loss per share of $3.32 while COG shows earnings per share of $1.14, EQT reports earnings per share of $2.13, and RRC shows a loss per share of $1.90.
Exterran Holdings Inc. (EXH)
This Motley Fool analyst picked up on the fact that EXH insiders, earlier in August, placed noteworthy open market purchases of the company’s stock. Another analyst there, the one who considers accounts receivable and the number of days’ worth of sales that are owed the company, sees EXH’s trend as favorable, as discussed here.
Its market capitalization is $$737.82 million. Its gross margin is 29.63%. Loss per share is $3.11. EXH closed Thursday at $11.54, about 2.53% down. It was close to its 52-week low of $9.80.
Marathon Oil Corporation (MRO)
MRO halted production in the Gulf of Mexico on Thursday due to a tropical disturbance, as mentioned in this Reuters news brief. Oil prices also fluctuated as traders reacted to a number of additional economic data, as discussed here. Shareholders have enjoyed about a 10% increase in value, thanks to a recent split, as mentioned here.
MRO closed Thursday at $26.78. Its 52-week range is $23.32 to $54.33. Earnings per share are $$4.76, and its dividend yield is 2.30%. With a market capitalization of $19.12 billion, we see this stock as very undervalued at this time.
Ivanhoe Energy Inc. (IVAN)
Drilling began in mid-August on an exploration well in Mongolia, as reported here. IVAN reported quarterly revenue growth of 52.30%, compared to its competitors Apache Corp.’s (APA) 45.4% and Exxon Mobile Corporation’s (XOM) 36.3%. IVAN’s gross margin is 59.99% while APA’s is 82.91% and XOM’s is 31.45%.
IVAN shows a loss per share of 0.1%. APA reports earnings per share of $9.95 and XOM reports $7.59. IVAN closed at $1.61 Thursday. According to this news brief, its second quarter increase in revenue was due to higher production and stronger realized prices.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.