Oil and gas companies should play a part in any well diversified portfolio. There are numerous companies in the industry and they cover a wide spectrum of risk. The companies also cover a wide area of stock types, from dividend-friendly income stocks to higher-risk growth stocks.
In this article, I examine five oil and gas companies that are prospering from positive factors such as the new practice of horizontal drilling, having colonial roots where they operate, and operating in parts of the lucrative Bakken Oil Shale. These factors could allow these companies to become excellent candidates for investment in the near future. I look at this in detail:
Total S.A.
Total S.A. (TOT) has been range bound over the past year between $40 and $70 per share, and for the past four months has been fluctuating right in the middle of that range. The company pays out a dividend of $2.51 per share that amounts to a dividend yield of 4.6% at the stock's current price. The dividend is paid out consistently, but varies from one period to the other in amount. The payout ratio on the stock is 37%, which is slightly higher than the industry average of 31%, and substantially higher than the company's nearest competitor BP's (BP) payout ratio of 21%.
Total S.A. is headquartered in Paris, France, and was established in 1924. Today, the company is one of the top oil and natural gas organizations in the world. In my opinion, Total S.A. has an advantage (being a French company) in areas of Africa, where it has had colonial roots for centuries. Many of these commodity-rich nations would rather do business with the French, than with other western nations. On the other hand, Total's ties to Iran may cause the company revenue loss in the present times, due to imposed sanctions on Iran.
Continental Resources
Continental Resources (CLR) has been on a steep advance since October of 2011, and has recently been hitting new 52-week highs on a weekly basis. The stock has more than doubled in the time period. Two of the company's closest competitors are Chesapeake Energy Corporation (CHK) and EOG Resources, Inc. (EOG).
Chesapeake Energy has a current PEG ratio of 0.82 with a five-year earnings growth forecast of 10.4%, while EOG Resources has a current PEG ratio of 0.39 with a five-year earnings growth forecast of 67.3%. Continental Resources, on the other hand, has a current PEG ratio of 2.94, with a five-year earnings growth forecast of 11.7%.
Although Continental Resources may look expensive at first glance, I think this represents a significant investor interest in the company since it first went public in 2007, and is a reflection of the company's expertise in technologies such as horizontal drilling. Continental Resources is also the largest lease holder in the oil-rich Bakken shale - located in the northern sections of western North Dakota and eastern Montana. In the last quarter, the company saw its proven reserves in the area increase by 39%, and with oil prices on the rise this increase will boost the company's revenues exponentially.
Northern Oil & Gas Inc
Northern Oil & Gas inc (NOG) has been range bound over the past year between $14 and $34 per share, and for the past five months has been fluctuating right in the middle of that range. The company's closest competitor in this industry is Exxon Mobil Corporation (XOM). Exxon Mobil currently has a five-year expected PEG ratio of 1.39, while Northern Oil & Gas has a five-year expected PEG ratio of 1.09. Northern Oil & Gas is cheaper in terms of growth when compared to Exxon Mobil, but pretty much in line with the industry average of 0.99.
Northern Oil and Gas is headquartered in Wayzata, Minnesota, and the company's major operations are in this general area. The company explores for, develops and produces crude oil and natural gas in the Williston Basin Bakken area of the United States. Northern Oil and Gas also acquires crude oil and natural gas properties, in addition to smaller operators in this area. In my opinion, the company's assets have and will continue to grow in value as this 'hotspot' (Bakken Shale) in the industry continues to produce results. The U.S. Energy Department estimates that the area contains enough natural gas to meet the country's demands for the next century.
Whiting Petroleum
Whiting Petroleum (WLL) has been range bound over the past year between $30 and $80 per share, and for the past five months has been fluctuating right in the middle of that range. Two of the company's closest competitors are Continental Resources and EOG Resources, Inc. Continental Resources has a current PEG ratio of 2.94 with a five-year earnings growth forecast of 11.6%, while EOG Resources has a current PEG ratio of .39 with a five-year earnings growth forecast of 67.3%. Whiting Petroleum, in comparison, has a current PEG ratio of 0.89 with a five-year earnings growth forecast of 16.3%.
I believe Whiting Petroleum is moderately priced in terms of future growth, and with the company's strong margins in the trailing twelve months (a pretty tough year in general), the company is in good standings at present. Whiting Petroleum also has significant holdings in Bakken Shale which it has not yet fully tapped, and that should amplify the company's growth prospects in the long term. The company is based in Denver, Colorado, and also has operations in the Permian Basin, Gulf Coast, the Rocky Mountains, Michigan regions and other Mid-Continent regions of the United States.
Oasis Petroleum
Oasis Petroleum (OAS) has been range bound over the past year between $18 and $38 per share, and for the past six months has been fluctuating in the upper quartile of that range. The company's closest competitors in this industry are Marathon Oil Corporation (MRO) with a five-year expected PEG ratio of 0.99 and SM Energy Company (SM) with a five-year expected PEG ratio of 0.70. I think Oasis Petroleum is a little 'pricey' comparatively, in terms of growth, with a five-year expected PEG ratio of 1.31, but there is good reason for this premium in the longer term.
Oasis Petroleum is headquartered in Houston, Texas, where it was established in 2007. The company acquires oil and natural gas properties in the Montana and North Dakota areas of the Williston Basin. Oasis Petroleum also engages in exploring for, and the production of oil in the formations of Bakken and Three Forks in these states. In my opinion, the company's operations in this area represent significant growth opportunities for it well into the twenty-first century. According to a report by the United States Geologic Survey, there is estimated to be undiscovered oil (3.65 billion barrels), natural gas (1.85 trillion cubic feet) and natural gas liquids (148 million barrels) in the aforementioned regions. The deposit embodies the largest oil accumulation ever assessed by the department.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
