6 Oil Stocks Analysts Expect To Double In 2012

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Includes: GMXRQ, HERO, HFC, KEG, LINEQ, MDR
by: Rougemont

The market correction and the drop in oil has created a solid buying opportunity for long term investors. It's a good time to start picking up cheap shares and setting up your portfolio for some big gains for 2012. There has been plenty of gloom and doom in the headlines but it is important to remember that oil demand is only going to increase in the future, and recessions don't last forever. If you buy at or near the recent lows, you could end up just about doubling your money if these stocks hit the price targets set by analysts this year. Most analysts set price targets based on where they believe the stock should be trading at in the next 12 months or so. Here are a number of stocks that have price targets that are around double the current stock price:

McDermott International (NYSE:MDR) shares are trading at $10.97. McDermott provides engineering and construction services primarily for offshore oil and gas projects. The shares have traded in a range between $9.34 to $26.14 in the past 52 weeks. The 50-day moving average is $13.25 and the 200-day moving average is $19.24. Earnings estimates for MDR are just $1.19 per share in 2011, and $1.55 for 2012, so the PE ratio is about 6.5 times forward earnings. MDR shares plunged recently after earnings were announced, and closed down about 25%. Some projects were not as profitable as expected this quarter, but the company will probably improve operations in the coming months and the stock is likely to rebound sharply in the coming days. This stock received a couple of downgrades recently but Morgan Keegan has a outperform rating and a $24 price target on MDR shares.

Key Energy Services (NYSE:KEG) is trading at $12.93. Key provides maintenance and other services to oil and gas companies. These shares have traded in a range between $8.27 to $20.77 in the last 52 weeks. The 50-day moving average is $11.74 and the 200-day moving average is $14.86. KEG is estimated to earn 98 cents per share in 2011 and $1.61 in 2012. The book value is $6.84 per share. In terms of PE ratios, this appears to be one of the cheaper oil stocks in the market. Canaccord Genuity has a buy rating with a $23 price target.

Berry Petroleum (BRY) is trading at $34.55. Berry is a oil and gas company with projects located in California, Texas, Utah, and Colorado. These shares have traded in a range between $30.59 to $61.77 in the last 52 weeks. The 50-day moving average is $42.61 and the 200-day moving average is $47.76. BRY is estimated to earn $2.66 per share in 2011 and $4.18 in 2012. The book value is $20.58 per share. BRY pays a dividend of 32 cents which yields .9%. Global Hunter Securities recently downgraded BRY and lowered the price target to $45, however, RBC Capital Markets has a outperform rating with a $67 price target on BRY shares.

Hercules Offshore (NASDAQ:HERO) is trading around $3.79. Hercules is a offshore drilling company. These shares have traded in a range between $2.25 to $6.99 in the last 52 weeks. The 50-day moving average is $3.55 and the 200-day moving average is $4.69. HERO is estimated to lose about 54 cents per share in 2011, and lose 43 cents for 2012. The book value is stated at $7.29.

Not long ago, Hercules purchased 20 jackup rigs from Seahawk Drilling which could lead to higher revenues and improved financial results. FBR has a $8.50 price target on HERO shares.

GMX Resources, Inc. (GMXR) is trading at $2.50. GMXR is a oil and gas company that holds interests in some high potential areas, including the Niobrara Formation and the Haynesville Formation. These shares have a 52 week range of $1.57 and $6.48. The 50-day moving average is $2.38, and the 200-day moving average is $3.99, so the stock is trading well below recent support levels. Book value is stated at $3.41. Analysts see a big jump in revenues next year. The revenue estimates are seen jumping from around $129 million in 2011 and about $172 million in 2012. C.K. Cooper has set a $8 price target for GMXR shares.

HollyFrontier Corporation (NYSE:HFC) is trading around $30.69. HollyFrontier is a petroleum refining company, based in Texas. These shares have traded in a range between $15.69 to $38.90 in the last 52 weeks. The 50-day moving average is $31.79 and the 200-day moving average is $30.64. HFC is estimated to earn about $6.40 per share in 2011, and $5.29 for 2012. This company pays a dividend of 70 cents per share which yields about 2%. HFC shares dipped to about $26 recently, so anywhere near that level looks like a very good buying opportunity. Barclays Capital has set a $71 price target.

The data is sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.

Disclosure: I am long MDR, KEG.

Additional disclosure: I may buy BRY soon.