2 Promising Oil And Gas Picks And 2 Field Service Companies To Complement Them

Includes: CLR, NOV, RRC, SLB
by: Kinetic Investments

2012 looks to be a good year for natural gas and oil explorers/property developers, as well as for the oilfield services companies that do much of the heavy lifting on the hundreds of ongoing and prospective projects in the United States and abroad. Accordingly, I have put together a short list of natural gas/oil plays and the companies that service them that all have promising outlooks for 2012.

Oil and Gas Operations

1. Range Resources Corp. (NYSE:RRC)

Range Resources is an independent natural gas and oil company that is engaged in the exploration, development and acquisition of primarily natural gas and oil properties, mostly in the Appalachian and Southwestern regions of the United States. Headed into 2011, it owned 2,688,000 gross acres of leasehold, including 340,000 acres where it also owned a royalty interest. It has built a multi-year drilling inventory that is estimated to contain over 8,100 drilling locations, both proven and unproven. At the end of 2010 its proved reserves consisted of 4.4 trillion cubic feet equivalent of proved reserves, 80% natural gas, 49% proved developed, 85% operated and a reserve life of 22.3 years. During 2010, it acquired acreage located in its core areas, primarily in the Marcellus Shale, and sold its tight gas sand properties in Ohio. RRC currently trades around $65.50 with the highest analyst 52 week price target being $105.

RRC 52 Week Chart

RPC Chart

(Click to enlarge)

Valuation Measures

Market Cap (intraday)5: 10.37B
Enterprise Value (Dec 13, 2011)3: 12.00B
Trailing P/E (ttm, intraday): N/A
Forward P/E (fye Dec 31, 2012)1: 45.82
PEG Ratio (5 yr expected)1: 1.48
Price/Sales (ttm): 9.20
Price/Book (mrq): 4.42
Enterprise Value/Revenue (ttm)3: 10.75
Enterprise Value/EBITDA (ttm)6: 16.23

Balance Sheet

Total Cash (mrq): 51.88M
Total Cash Per Share (mrq): 0.33
Total Debt (mrq): 1.79B
Total Debt/Equity (mrq): 76.93
Current Ratio (mrq): 0.72
Book Value Per Share (mrq): 14.69

Income Statement

Revenue (ttm): 1.12B
Revenue Per Share (ttm): 7.08
Qtrly Revenue Growth (yoy): 46.50%
Gross Profit (ttm): 779.07M
EBITDA (ttm)6: 739.59M
Net Income Avl to Common (ttm): -291.90M
Diluted EPS (ttm): -1.63
Qtrly Earnings Growth (yoy): N/A

2. Continental Resources, Inc. (NYSE:CLR)

Continental Resources is an independent crude oil and natural gas exploration and production company with operations in the North, South and East regions of the United States. Headed into 2011, approximately 70% of its estimated proved reserves were located in the North region. It focuses its exploration activities in new or developing plays that provide it with the opportunity to acquire undeveloped acreage positions for future drilling operations. At the end of 2010, its estimated proved reserves were 364.7 million barrels of crude oil equivalent, with estimated proved developed reserves of 140.4 MMBoe, or 38% of its total estimated proved reserves and its crude oil consisted of 62% of its total estimated proved reserves. CLR currently trades around $69 with the highest analyst 52 week price target being $81.

CLR 52 Week Chart

CLR Chart

(Click to enlarge)

Valuation Measures

Market Cap (intraday)5: 12.33B
Enterprise Value (Dec 13, 2011)3: 12.91B
Trailing P/E (ttm, intraday): 24.33
Forward P/E (fye Dec 31, 2012)1: 21.81
PEG Ratio (5 yr expected)1: 1.85
Price/Sales (ttm): 8.36
Price/Book (mrq): 4.99
Enterprise Value/Revenue (ttm)3: 8.95
Enterprise Value/EBITDA (ttm)6: 10.17

Balance Sheet

Total Cash (mrq): 42.28M
Total Cash Per Share (mrq): 0.24
Total Debt (mrq): 896.22M
Total Debt/Equity (mrq): 37.06
Current Ratio (mrq): 1.03
Book Value Per Share (mrq): 13.48

Income Statement

Revenue (ttm): 1.44B
Revenue Per Share (ttm): 8.25
Qtrly Revenue Growth (yoy): 77.20%
Gross Profit (ttm): 727.80M
EBITDA (ttm)6: 1.27B
Net Income Avl to Common (ttm): 496.11M
Diluted EPS (ttm): 2.82
Qtrly Earnings Growth (yoy): 1,023.80%

Oil Well Services and Equipment

1. Schlumberger Limited (NYSE:SLB)

Schlumberger is a supplier of technology, integrated project management and information solutions to the international oil and gas exploration and production industry that consists of five segments: it Oilfield Services, which operates in each of the oilfield service markets, managing its business through its GeoMarket regions; WesternGeco, which is an advanced surface seismic company, provides reservoir imaging, monitoring and development services, and M-I SWACO, which is a supplier of drilling fluid systems; Smith Oilfield provides a range of technologically advanced products, services and engineering used in oil and natural gas development activities, and Distribution, which provide products and services to energy refining, petrochemical, power generation and mining industries. Earlier this month, SES Holdings Ltd. announced merger of its rig business with Schlumberger Rig Management Group. SLB currently trades around $73 with the highest analyst 52 week price target being $117.

SLB 52 Week Chart

SLB Chart

(Click to enlarge)

Valuation Measures

Market Cap (intraday)5: 98.82B
Enterprise Value (Dec 13, 2011)3: 101.95B
Trailing P/E (ttm, intraday): 21.78
Forward P/E (fye Dec 31, 2012)1: 14.94
PEG Ratio (5 yr expected)1: 0.83
Price/Sales (ttm): 2.56
Price/Book (mrq): 3.06
Enterprise Value/Revenue (ttm)3: 2.71
Enterprise Value/EBITDA (ttm)6: 10.82

Balance Sheet

Total Cash (mrq): 6.06B
Total Cash Per Share (mrq): 4.52
Total Debt (mrq): 11.49B
Total Debt/Equity (mrq): 36.33
Current Ratio (mrq): 1.88
Book Value Per Share (mrq): 23.47

Income Statement

Revenue (ttm): 37.63B
Revenue Per Share (ttm): 27.77
Qtrly Revenue Growth (yoy): 49.40%
Gross Profit (ttm): 5.95B
EBITDA (ttm)6: 9.43B
Net Income Avl to Common (ttm): 4.41B
Diluted EPS (ttm): 3.38
Qtrly Earnings Growth (yoy): -25.00%

2. National Oilwell Varco, Inc. (NYSE:NOV)

National Oilwell Varco, Inc. (NOV) is a provider of equipment and components used in oil and gas drilling and production operations, oilfield services and supply chain integration services to the upstream oil and gas industry. It operates in three business segments: Rig Technology, Petroleum Services & Supplies and Distribution Services. The Rig Technology segment designs, manufactures, sells and services systems for the drilling, completion and servicing of oil and gas wells. The Petroleum Services & Supplies segment provides consumable goods and services used to drill, complete, remediate and workover oil and gas wells, service pipelines, flowlines and other oilfield tubular goods. The Distribution Services segment provides maintenance, repair and operating supplies, and spare parts to drill site and production locations worldwide. NOV currently trades around $72.50 with the highest analyst 52 week price target being $105.

NOV 52 Week Chart

NOV Chart

(Click to enlarge)

Valuation Measures

Market Cap (intraday)5: 30.78B
Enterprise Value (Dec 13, 2011)3: 26.63B
Trailing P/E (ttm, intraday): 16.50
Forward P/E (fye Dec 31, 2012)1: 12.31
PEG Ratio (5 yr expected)1: 0.95
Price/Sales (ttm): 2.21
Price/Book (mrq): 1.75
Enterprise Value/Revenue (ttm)3: 1.96
Enterprise Value/EBITDA (ttm)6: 8.18

Balance Sheet

Total Cash (mrq): 3.87B
Total Cash Per Share (mrq): 9.13
Total Debt (mrq): 512.00M
Total Debt/Equity (mrq): 2.97
Current Ratio (mrq): 2.54
Book Value Per Share (mrq): 40.43

Income Statement

Revenue (ttm): 13.57B
Revenue Per Share (ttm): 32.31
Qtrly Revenue Growth (yoy): 24.20%
Gross Profit (ttm): 3.83B
EBITDA (ttm)6: 3.26B
Net Income Avl to Common (ttm): 1.86B
Diluted EPS (ttm): 4.40
Qtrly Earnings Growth (yoy): 31.70%

All four of the above names should be considered independent of each other and you may find some of them to be smart additions to your well-balanced 2012 portfolios.

Abbreviation guide for the above tables:

K = Thousands; M = Millions; B = Billions

mrq = Most Recent Quarter (as of Sep 30, 2011)

ttm = Trailing Twelve Months (as of Sep 30, 2011)

yoy = Year Over Year (as of Sep 30, 2011)

lfy = Last Fiscal Year (as of Dec 31, 2010)

fye = Fiscal Year Ending

1 Data provided by Thomson Reuters

2 Data provided by EDGAR Online

3 Data derived from multiple sources or calculated by Yahoo! Finance

4 Data provided by Morningstar, Inc.

5 Shares outstanding is taken from the most recently filed quarterly or annual report and Market Cap is calculated using shares outstanding.

6 EBITDA is calculated by Capital IQ using methodology that may differ from that used by a company in its reporting

Disclosure: I am long RRC.