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It still amazes me that an investor is able to find great bargains in the energy sector despite $100 a barrel oil and new technology opening up vast new reserves in North and South America. Here are two oil companies selling at less than 5 times operating cash flow and significantly under analysts’ price targets that I like:

Swift Energy (NYSE:SFY):

Swift Energy Company engages in acquiring, exploring, developing, and operating oil and natural gas properties. It focuses on inland waters and onshore oil and natural gas reserves in Louisiana and Texas. As of December 31, 2010, the company had estimated proved reserves of 132.8 million barrels of oil equivalent. (Business description from Yahoo Finance).

4 reasons SFY is undervalued at $32 a share:

  • Although net income has been somewhat sporadic, operating cash flow has been more consistent and the stock goes for less than five times trailing operating cash flow.
  • Credit Suisse has an “Outperform” rating and a $45 price target on SFY. In addition, Robert W Baird initiated the stock as “Outperform” as well in December.
  • The stock has a five year projected PEG of just .72 and is selling at just 43% above book value.
  • Given its small market capitalization and attractive assets, the company could easily find itself an acquisition target in 2012. This was recently speculated in a Barron’s article.

ConocoPhillips (NYSE:COP):

ConocoPhillips operates as an integrated energy company worldwide. The company’s Exploration and Production (E&P) segment explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids. Its Midstream segment gathers, processes, and markets natural gas; and fractionates and markets natural gas liquids in the United States and Trinidad. The company’s Refining and Marketing (R&M) segment purchases, refines, markets, and transports crude oil and petroleum products, such as gasolines, distillates, and aviation fuels. Its Chemicals segment manufactures and markets petrochemicals and plastics.(Business description from Yahoo Finance)

4 reasons COP is a buy at $72 a share:

  • Despite having the visibility of being one of the oil “majors”, ConocoPhillips sells for less than 5 times operating cash flow and just 43% of sales.
  • Credit Suisse has an “outperform” rating and a $93 price target on COP. The firm also expects EPS of $10.50 a share in FY2013. S&P also has a $93 price target on ConocoPhillips and projects it will grow earnings at a 30% plus annual rate over the next three years.
  • COP offers a generous dividend yield of 3.6% which it has grown at an 11% annual clip over the past five years. Given its robust cash flow, I would look for the dividend to continue to be increased smartly in the future.
  • COP has significantly beat earnings estimates the last two quarters and consensus estimates for FY2011 and FY2012 have increased over the last sixty days.



Disclosure: I am long COP.

Source: 2 Attractive Energy Stocks Currently Below Analyst Price Targets