The Top Energy Performers Over The Past 52 Weeks

by: Michael Filloon

It has been a tough week for energy. Worries about a world recession have pushed commodity prices lower. I would be careful in this space at least through October, as these companies could continue to retrace in the short term. Some energy names have held up better over the past 52 weeks. I believe the companies that have outperformed over the past year, will continue to do so.

Cabot Oil and Gas (NYSE:COG) is up 136% over the past 52 weeks. It beat earnings estimates in the first quarter by 66.7%. The second quarter of 2011 was also good, as Cabot beat by 46.4%. It has over 2 million acres in the United States. Its best acreage lies in the Marcellus and Eagle Ford. Cabot estimates its Marcellus acreage will produce 2300 to 2700 wells. It believes it can drill 67 wells here in 2011. The Eagle Ford will produce 400 to 500. Cabot has increased its production guidance twice this year to an estimated 40% to 46% growth. It has been able to reduce unit costs and expects double digit reserve growth. I like Cabot at these levels.

EV Energy Partners (NASDAQ:EVEP) is up 105% over the past 52 weeks. It also pays a 4.2% dividend. EV Energy has beat earnings for three straight quarters. It is the top producer in Ohio. It has 159000 net working interest acres in the Utica shale. It has overriding royalty interest in approximately 240000 net acres. Some of this acreage in the Utica is in the form of a JV with Chesapeake (NYSE:CHK). EV Energy is the largest producer in the Chalk, and has over a million acres. It has 20000 net acres in the Barnett shale. I believe now is the best time to be invested in MLPs. Not only does it offer a good dividend, these companies are in a position to make acquisitions. Because of the threat of recession, there could be a further retracement of the price of oil. If this happens, oil producers will lose significant market cap and start to look cheap. It is 78% hedged in 2011. This hedged position will protect its revenue stream.

HollyFrontier Corp. (NYSE:HFC) is up 100% over the past 52 weeks. This company was formed with the $7 billion merger of what I believe to be the best two refiners in the United States. This company combined five large Mid-Continent, Rocky Mountain, and Southwest refineries. The story stays the same in this sector. This company has access to cheap Canadian and U.S. feedstocks. This oil flowing down the center of the country is considerably cheaper than brent. Historically refineries have been volatile, as these companies need economic growth to sell high volumes of product. For HollyFrontier, differentials are the story. The large difference in price of WTI versus Brent should create very good margins for years to come. This is a very large refiner with over 440000 bpsd and a complexity over 12. It also owns 100% of GP and 7.3 million LP units of Holly Energy Partners (NYSE:HEP). I believe the refiners will continue to see very good margins for the next couple of years in the middle third of the United States. Because of this, the sector is a buy, and HollyFrontier might be the best investment of the group. It is possible that Sunoco's announcement to idle its two refineries in Philidelphia and Marcus Hook will not be the last, as the price of Brent continues to move higher. Look for refiners with access to U.S. and Canadian crude to have significant upside such as Western Refining (NYSE:WNR).

SM Energy (NYSE:SM)
is doing all the right things. It is up 85% over the past 52 weeks. Other than a 2 cent miss on its first quarter of 2011 earnings, SM Energy has beat estimates three out of the last four. Of these three quarters, it has beat by 72.2%, 53.3% and 65.5%. It has a very nice inventory of work, highlighted by its 196000 net Eagle Ford acres. Location is the key here, as its Webb, Dimmit, and Maverick holdings might be the best of the Eagle Ford. I have not been as happy with SM Energy's Bakken results, but have seen some improvement. It had a very nice IP rate with its Lee 13-8H, which calculated to 1719 Bo/d. This well is located in Camp Field where there have been some nice results as of late. It also has upside through its Permian and Granite Wash acreages. SM Energy has a conservative balance sheet, and does not outspend cash flow. Its recent divestiture of Eagle Ford acreage is proof of its commitment to its shareholders. SM Energy is a very good investment as they continue to work the Eagle Ford and see improvement in Bakken results.

EQT Corp. (NYSE:EQT) is up 68% over the past 52 weeks. It has been on a tear since October of last year. EQT has had a sales growth of CAGR over 30%. Its business is divided into three divisions:

  1. Production-5.2 Tcfe Proved Reserves
  2. Midstream-12000 Pipeline Miles
  3. Gas-275000 Customers

EQT has 3.5 million acres in the northeast United States. It has 520000 net acres in the Marcellus. EQT estimates it will earn $6 million/Marcellus well. It will drill 100 wells here in 2011. EQT has 2.7 million acres in the Huron. It estimates earning $1.4 million/well. EQT plans to drill 120 total wells here this year. In summary, EQT is classified as a utility, but upside is concentrated in its production business. The Marcellus is one of the best plays in the country, and is profitable even with very low natural gas pricing. In 2010, EQT had 7 of the top 18 Marcellus wells with 6 originating from Greene County, PA.

Oceaneering International (NYSE:OII) is one of the few oil service companies with growth over the past 52 weeks. It is up 43% in 12 months. Oceaneering's success has to do with its specialized business, and has performed well even with a difficult business environment in the Gulf of Mexico. Its leverage to deep sea oil should continue to drive its business. The oil business continues to be focused on difficult areas to retrieve oil, and Oceaneering should continue to benefit from this. As floating rig demand increases so does demand for remote operated vehicles. 72 floating rigs are on order as of June of this year. 35 of these rigs are already contracted at an average time frame of 7 years. As demand for floating rigs increase so does revenue per day on remote operated vehicles. Estimates have subsea completions increasing 45%. Oceaneering's subsea products are also in demand as they are required for every subsea completion. Some of these products will see a much higher demand as safety concerns weigh on the sector after the Macondo disaster. This has helped to produce a $405 million backlog in Oceaneering's subsea products.

These companies are all good plays going forward. Even though energy has taken a big hit recently, demand still appears good. These companies have outperformed and should continue to do so.

Disclosure: I am long WNR.