3 Oil And Gas Stocks Ready To Tumble, 1 To Consider Buying

Includes: APA, CLR, COG, EOG
by: ValueMax

EOG Resources (EOG) is one resource company that every investor should have in their sight. Covering both crude and natural gas, EOG has been taking a hit, along with other natural gas companies, with the current high supply/low demand for natural gas. As such, EOG has decided that for the next quarter, it will focus only 10% of its revenue on natural gas production and will devote every other available resource on crude oil production and refining. This is an incredibly intelligent move for the short term, but could be detrimental in the long run for two reasons. One, crude oil may one day fall off from its mantle of top vehicle powering option. Another reason that this may be an unintelligent move is that if all of these high-producing natural gas companies decide to cease in the production of natural gas, we may see surpluses fall very quickly, and subsequently, the price will shoot way up. I feel that the mass migration of big player companies will come back to haunt them in the long run, because the number of companies producing may deplete rapidly, as will the availability of said product. So, if you are an aspiring day trader who is looking to make some quick profit, then definitely cash in on EOG now. On the other hand, if you are looking for some long-term gains to flesh out your stock portfolio, then avoid EOG for now.

Another company that any investor should be leery of is Apache (APA). Recently, the company's RSI fell below 30, a sign that sellers are rising exponentially and are causing the stock to look quite unstable. While this is bad news for investors in Apache, some good news that may lift the spirits of investors is the recent discovery of oil in a Kenyan town. Apache has already gotten its hand in the find, and if it turns out to be profitable over the long run, expect to see stock go up. On the other hand, totally new drilling operations are sometimes rather slow to start up, so if there is lack of interest in the stock of Apache and a lowering of price a few days after the announcement of drilling, do not be shocked. Also, just recently, Apache saw a heavy drop in stock prices after selling $3 billion dollars worth of bonds to raise money for an acquisition of Cordillera Energy Partners III LLC. This move has been cited as lackluster, at best, as the area cost Apache $6,000 per acre. Gas prices will have to go way up for Apache to come out on top in the long run with the purchase of Cordillera. As for now, I would advise that any investor purchase some stock in this company because it will likely come out on top after this acquisition of Cordillera.

Another oil company that has been on a downfall for the past few months is Cabot Oil & Gas (COG). The biggest issue that recently arose involves the supposed contamination of wells in a Pennsylvania town by Cabot. The issue stemmed from the drilling for natural gas in the small town of Dimock in northeastern Pennsylvania.

During the investigation, there were talks of individuals suing Cabot over unsafe practices that led to the contamination of some of the wells in the town. These lawsuits have come to light despite the government determining that Cabot's practices only contaminated one well, and the well has already been taken care of as far as the chemical being ingested. Personally, I expect Cabot to begin to make a recovery up until the lawsuits get more press attention and investors begin to see the company taking the hit from lawsuits. At this point, the price of Cabot's stocks will decrease severely, even before the judgment because investors will not want to take such a big risk in a company that really does not have much to offer otherwise. So, as far as long term, avoid Cabot until these lawsuits blow over and the company unveils some more exciting news that will kick start stock trading.

Continental Resources (CLR) seems to be taking a raise as far as stock prices go, and for good reason. Continental recently purchased 37,900 acres in the Bakken area for natural gas drilling. This act of confidence is one thing that prompted investors to consider placing their money in Continental. Also, the decision to purchase this comes at a great time of difficulty for natural gas, probably the reason that Continental decided to purchase much land in the oil rich Bakken region. By shifting the focus of the company from less of a middle ground to a more stable investment, Continental shows how interested it is in keeping its constituents happy by keeping stock prices up for the time being. The simple question comes in, though, is it okay to lose such a high number of natural gas development corporations? To put it plainly, no, we need natural gas. As mentioned earlier, if every resource company ceases to work with gas, expect to see the price of natural gas shoot up in anticipation and speculation. Once again, as stated earlier, if you are planning on purchasing Continental stock, then definitely consider the possibility that in the long run, Continental may take a serious hit, which could cripple investors in the future. The reason for this outlook on Continental is that it has nothing in the works and still, of course, has to put money into natural gas. These few wasted dollars could add up, because natural gas is so unnecessary with its high supply. Another issue that comes along with the dependency on crude oil is that crude oil stock prices are subject to change, and when the company in question relies solely on one type of resource, it could fail miserably over time. Avoid Continental until it presents something worth mentioning.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.