2 Oil And Gas Stocks To Buy Now For Gains In 2013

Includes: ATPAQ, BP, COG, CPE, SD, SDR
by: Cris Frangold

In the recently beaten down oil and gas industry, there still seems to be some hope among the ruins. Cabot Oil & Gas (NYSE:COG) is one of the few in this sector that appears to have much positive news of late - and this could be a nice change of pace for shareholders of this drilling and production operation.

In this article I discuss why a new pipeline project in the northeast for Cabot could very well catapult the company's shares into much higher territory and why investors seeking growth should hop on board sooner rather than later if they want to really enjoy the ride.

Getting Down to Business

Investors in Cabot's shares have a lot to feel good about right now - starting with the company's effective management team, forward looking strategy, and strong new pipeline project. Plus, in order to further increase investor returns, Cabot also has placed a big focus on selling off its underperforming assets. One example of this includes the company's sale of its Rocky Mountain assets.

One of the big catalysts for Cabot's predicted share growth involves the company's Constitution Pipeline Company, LLC - a joint development between Cabot and Williams Partners L.P. This 121-mile pipeline will be responsible for connecting the production of natural gas in northeastern Pennsylvania with that of the northeastern markets.

Because this project will have such an impact on the transportation of natural gas to the area, it also stands to reason that its success will directly affect the movement of Cabot's shares. This, combined with legal battles such as the ex-BP employee oil spill cover-up, should certainly add even more to the company's positive light.

In fact, in many ways, even with the recent falling of oil and gas prices across the board, Cabot is one of the few companies in this sector that continues to make a profit in spite of the many obstacles.

Recently trading in the mid-$30's, Cabot sports a somewhat aggressive price to earnings ratio of nearly 58. The share price is still off its 52-week high of $45, yet analysts are expecting the shares to at least get back into the low-$40's by year end. I tend to agree, especially based on the number of positives the company is currently facing.

Over the past several weeks, general analyst sentiment has shifted between Neutral and Buy - further indicating that this company may truly be forging ahead. And, although the most recent dividend of $0.02 is nothing to write home about, I feel that investors will still be well rewarded with shares of this company in their portfolio.

Considering Other Oil and Gas Industry Options

In the oil and gas industry, there could be a couple of other relevant companies' shares for investors to consider, but only a couple that would really be worth taking a closer look at presently.

One of these is SandRidge Energy (NYSE:SD). Based on a recent upgrade from JPMorgan, the company's shares are up over 5% and possess a newly increased target price of $13. The shares are currently trading in the $8 per share range.

Over the last two years, SandRidge has shifted its product mix from natural gas to mostly oil, and, where it can, natural gas liquids. Its shift has been wise, given sub $3 per mcfe dry natural gas prices.

The company has been able to manage cash well, and the markets have been receptive to raising cash. Specifically, the company floated nearly $600 million in its SandRidge Mississippian Trust ll (NYSE:SDR) in late April, with hefty targeted payouts as high as 16%.

Drilling operations for the company are also going well. The company stated that its 2011 year end proved reserves were up 11% to 471 million boe - and that included oil reserves that also went up by 17% to 245 million bbl.

Even though shares are recently off of their 52-week high by over 35%, analysts' mean price target suggests over 30% upside potential for these shares. With this in mind, I'd likely take a good close look at SandRidge as a companion to Cabot shares.

Callon Petroleum (NYSE:CPE) could be another consideration for investors. Trading at a near 52-week high of just over $6, this stock has a P/E of 2.32 and EPS of $2.62. First quarter 2012 results have not yet been announced, so it remains to be seen where this stock is headed for both the near or the long term. For the moment, though, I would not stock up on shares quite yet.

Another company relevant to Cabot is BP (NYSE:BP). Similar to others in the oil and gas industry, BP has had it fair share of bad news recently. One such report that could bring BPs share price lower entails an ex-BP employee covering up the severity of the Gulf of Mexico oil spill of 2010. However, in any case, it's not likely that the company's shares will increase on the news.

BPs stock, currently trading in the mid-$40's, is a bit off its 52-week high of just over $48. The company's dividend of $1.92 per share, though, is yielding investors 4.42% - so even as they await company news, those who are seeking income may still be rewarded. With this in mind, hold if you already own it, but hold off if you don't.

ATP Oil & Gas (ATPG) is another industry player having some difficulty keeping its share price steady. Due to the challenge of expanding operations where the company has never worked before - especially when drilling into deep water - can cause some setbacks, even with simple logistical issues. The firm is currently drilling the Shimshon well in the Levant Basin of offshore Israel. However, the well is in over 3,600 feet of water with a target format depth of nearly 15,000 feet.

Over the past year, the company's share price has fallen from a high of over $19 to its current range of below $8. Even the analysts don't give these shares much hope, with a 1 year estimated share price target of under $10. I feel that ATP shares don't seem to offer a great deal of positive opportunity at this time.

The Bottom Line

Based on all of the good news regarding the new pipeline project - and strengthened by the fact that Cabot has been able to continue in positive territory regarding forward momentum and future projections - I would definitely rate this company's shares as a keeper. In fact, according to analysts, Cabot has been the subject of numerous reports - and it appears to have highly positive ratings all around.

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