3 Oversold Oil Stocks With Strong Insider Buying

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Includes: BAS, PES, UPLMQ
by: Hawkinvest

The combination of a declining stock market and falling oil prices has led to huge drops in the energy sector. While some analysts believe that the price of oil could continue dropping, it seems that oil has found support in the low $80 per barrel range. China's economy is still growing even though it is at a slower pace, and demand for oil from other emerging market countries should help support the price, especially in the long-term. Even if oil drops a bit more, the decline for some of the stocks in the sector seems excessive and a number of company insiders are taking advantage of the lower prices and buying up shares. When insiders buy, it is often a signal for other investors to follow and possibly buy into as well. Here are some oversold oil stocks seeing new insider buying:

Ultra Petroleum Corp. (UPL) shares are trading for less than half the 52-week high and the stock is now showing signs of bottoming out. Ultra is an independent oil and gas company that is primarily focused on developing natural gas projects it has in the Green River Basin of Wyoming, and in the Appalachian Basin of Pennsylvania. With about 93,000 gross (53,000 net) acres around Pinedale and Jonah Field and about 500,000 gross (260,000 net) acres in the Marcellus Shale region, this company has significant development opportunities. The company recently reported solid financial results and it earned a profit of $49.6 million, or 32 cents per share in the first quarter of 2012. With the company trading at low valuations, it could be time to buy shares. At least one insider seems to think the stock is a great buy now: On May 23, 2012, Bradley C. Johnson, an officer, bought 5,300 shares in a transaction valued at about $100,541.

Here are some key points for UPL:
Current share price: $21.02
The 52-week range is $17.62 to $47.89
Earnings estimates for 2012: $1.36 per share
Earnings estimates for 2013: 96 cents per share
Annual dividend: none

Pioneer Drilling Company (PDC) shares have been cut by more than half, off of the 52-week high. This company provides contract land drilling, well, and other services to independent and major oil and gas exploration and production companies. Investors have been concerned that low natural gas and oil prices would lead to reduced demand for the services that Pioneer provides, but the concerns might be overblown. The company recently reported solid financial results and for the first quarter of 2012, it earned $14.2 million, or 23 cents per diluted share, an increase of 109% over the fourth quarter of 2011. With the shares trading for close to 7 times earnings and below the book value of $8.55, this stock appears very undervalued. On June 14, 2012, the CEO, Stacy Locke, bought 16,602 shares in a transaction valued at about $114,388.

Here are some key points for PDC:
Current share price: $7.51
The 52-week range is $5.83 to $18
Earnings estimates for 2012: 87 cents per share
Earnings estimates for 2013: 96 cents per share
Annual dividend: none

Basic Energy Services, Inc. (NYSE:BAS) shares were already looking very cheap, but then came a warning by Halliburton (NYSE:HAL) that profit margins would be impacted in the second quarter due to higher costs. This news helped put new pressure on most oil services stocks. That was followed up by Goldman Sachs (NYSE:GS) downgrading the shares of Basic Energy Services to a sell rating, which would have seemed more appropriate to do when the stock was trading a lot closer to the 52-week high of $37.79, rather than near the 52-week low. The stock now trades for about 5 times earnings, and for close to book value, which is $9.22 per share. The company recently authorized a corporate share buyback for about $35 million. Insiders have been loading up as well. On June 13, 2012, Steven Webster, (a director) bought 75,000 shares for $9.50, in a transaction valued at $712,372, and other insiders were buying large positions in May.

Here are some key points for BAS:
Current share price: $9.43
The 52-week range is $9.20 to $37.79
Earnings estimates for 2012: $1.92 per share
Earnings estimates for 2013: $1.91 per share
Annual dividend: none

Data sourced from Yahoo Finance. No guarantees or representations are made.

Disclosure: I am long BAS.

Disclaimer: Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.