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Are you interested in investing in only the 'cream of the crop' oil and gas companies? Today we focus on oil and gas companies with strong profitability and that were given a strong vote of confidence by oil and gas industry analysts. We think you'll like the list of stocks we've uncovered.

The Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.

The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue

We first looked for oil and gas stocks. We then screened for businesses with strong profit margins (1-year operating margin>15%)(Net Margin [TTM]>10%). We next screened for businesses that analysts rate as "Strong Buy" (mean recommendation < 2). We did not screen out any market caps.

Do you think these stocks should have higher valuations? Use this list as a starting-off point for your own analysis.

1) QR Energy, LP (NYSE:QRE)

Sector:Basic Materials
Industry:Independent Oil & Gas
Market Cap:$743.43M
Beta:-

QR Energy, LP has a Operating Profit Margin of 21.33% and Net Margin of 38.22% and Analysts' Rating of 1.40. The short interest was 0.41% as of 05/31/2012. QR Energy, LP, through its subsidiary, QRE Operating, LLC, engages in the acquisition, exploitation, development, and production of onshore crude oil and natural gas properties in the United States. As of December 31, 2011, its properties consisted of working interests in 3,867 gross producing wells located in Texas, New Mexico, Arkansas, Louisiana, southwestern Kansas, Oklahoma, Florida, and Alabama. It also had estimated net proved reserves of 34.

2) Evolution Petroleum Corp. (NYSEMKT:EPM)

Sector:Basic Materials
Industry:Independent Oil & Gas
Market Cap:$223.12M
Beta:1.42

Evolution Petroleum Corp. has a Operating Profit Margin of 47.87% and Net Margin of 27.63% and Analysts' Rating of 1.30. The short interest was 5.04% as of 05/31/2012. Evolution Petroleum Corporation, together with its subsidiaries, engages in the acquisition, exploitation, and development of properties for the production of crude oil and natural gas in the United States. The company's principal asset includes the Delhi Holt Bryant Unit located in the Delhi Field in Northeast Louisiana. It also holds 5,362 net developed acres and approximately 4,179 net acres as undeveloped and associated with its proved drilling locations in the Giddings Field located in Central Texas, as well as own leases on approximately 764 net acres in the Lopez Field in South Texas; and holds Woodford Shale Projects in Southeast Oklahoma. As of June 30, 2011, it had proved reserves of 13,848 thousand barrels of oil equivalent.

3) Mid-Con Energy Partners, LP (NASDAQ:MCEP)

Sector:Basic Materials
Industry:Independent Oil & Gas
Market Cap:$362.92M
Beta:-

Mid-Con Energy Partners, LP has a Operating Profit Margin of 39.47% and Net Margin of 42.42% and Analysts' Rating of 1.40. The short interest was 0.17% as of 05/31/2012. Mid-Con Energy Partners, LP engages in the acquisition, exploitation, development, and production of oil and natural gas properties in North America. Its principal areas of operation are located in southern Oklahoma, northeastern Oklahoma, and parts of Oklahoma and Colorado within the Hugoton basin in the Mid-Continent region of the United States. The company owns a 68% average working interest in 296 gross producing (195 net) wells; 141 gross injection (93 net) wells; and 33 gross (29 net) wells shut-in or waiting on completion.

*Company profiles were sourced from Finviz. Financial data was sourced from Yahoo Finance.

Source: 3 Profitable Small Cap Oil & Gas Stocks With The Highest Analyst Ratings