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What follows is a list of oil and gas companies that are specialized in different industries: Exploration and production, oil equipment, and integrated oil and gas. Of the three, the Street is most bullish about Schlumberger (NYSE:SLB) - rating it a "strong buy" - due to its impressive momentum and increasing scale. Based on my review of the fundamentals and multiples analysis, I share this preference. Note that all ratings are sourced from T1 Banker.

Valero (NYSE:VLO)

Valero is rated around a "hold" and trades at a respective 6.9x and 6.3x past and forward earnings with a dividend yield of 2.4%.

Consensus estimates for Valero's EPS forecast are that it will grow by 3.8% to $3.51 in 2012, grow by 18.2% in 2013, and then decline by 17.2% in 2014. Assuming a multiple of 7.5x and a conservative 2013 EPS of $4.11, the rough intrinsic value of the stock is $30.83, implying 21.6% upside. Guidance for the fourth quarter was reserved largely due to uncertainty in end market demand. Going forward, management needs to leverage its access to export markets to keep margins up. At the same time, Valero is also improving productivity by modernizing several of its plants. The stock has fallen 19.3% over the last 52 weeks, underperforming the S&P 500 by 21,000 basis points. I believe that the company is led by a solid management team with deep industry knowledge. Valero is a safe stock since the bar has been set low for earnings expectations.

Schlumberger

Schlumberger is rated a "strong buy" and trades at a respective 22.2x and 13.7x past and forward earnings with a dividend yield of 1.4%.

Consensus estimates for Schlumberger's EPS forecast are that it will grow by 28.1% to $4.69 in 2012 and then by 22% and 20.1% in the following two years. Assuming a multiple of 17.5x and a conservative 2013 EPS of $5.67, the rough intrinsic value of the stock is $88.23, implying 27.6% upside. During the third quarter, Schlumberger gained momentum on land and offshore in domestic markets. Rig count and pricing trends further continue to improve. Greater-than-expected demand has further boosted confidence in deepwater and exploration activity. I strongly recommend investors aggressively accumulate shares, since secular trends are pointing directly in Schlumberger's favor. Demand will naturally grow as oil and gas gets increasingly scarce and thus harder to find.

Petroleo Brasileiro (NYSE:PBR)

Petroleo is rated a "buy" and trades at a respective 8.3x and 8.2x past and forward earnings with a dividend yield of 0.5%.

Consensus estimates for Petroleo Brasileiro's EPS forecast are that it will decline by 14.7% to $3.31 in FY2011 and then turn around to grow by 4.5% and 2.9% in the following two years. Assuming a multiple of 9x and a conservative FY2012 EPS OF $3.43, the rough intrinsic value of the stock is $30.87, implying 5.2% upside. Fourth quarter was disappointing and costs are likely to stay elevated at least up until the near future. Management did not give guidance for 2012, which suggests uncertainty. The emerging market focus is also less of a core benefit given signs of domestic recovery. Due to the lack of upside and lowered benefit of emerging market exposure, I recommend steering away from a long position for now.

Source: Schlumberger Preferred Over These 2 Oil And Gas Firms

Additional disclosure: We seek IR business from all of the firms in our coverage, but research covered in this note is independent and for prospective clients. The distributor of this research report, Gould Partners, manages Takeover Analyst and is not a licensed investment adviser or broker dealer. Investors are cautioned to perform their own due diligence.