3 Oil And Gas Stocks Commanding Profits But With Minimal Debt

Includes: PBT, PHX, SJT
by: ZetaKap

Experienced investors in the oil and gas space know that high company debt is unavoidable, and it's easy to overlook if a company can keep bringing in profits. But what's even more ideal is when a company can achieve profits without building up massive debt, since it points to a well-run, disciplined company that has more than just a refined business model. For our list today, we scanned for companies that are reliable earners that have not heavily borrowed against assets to keep the business going. All of the oil and gas companies we screened for have strong profit margins and minimal near term debt. If these traits intrigue you, then you will like the list of oil and gas stocks we 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

The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.

We first looked for oil & gas stocks. We then looked for companies with strong profit margins (1-year operating margin>15%)(Net Margin [TTM]>10%). We then looked for businesses that operate with little to no debt (D/E Ratio<.1). We did not screen out any market caps.

Do you think these stocks will perform well? Use our list along with your own analysis.

1) San Juan Basin Royalty Trust (NYSE:SJT)

Sector Basic Materials
Industry Independent Oil & Gas
Market Cap $634.83M
Beta 0.67

SJT stock chart

Key Metrics

Operating Profit Margin 97.69%
Net Margin 97.69%
Debt/Equity Ratio 0.00
Short Interest 2.25%

San Juan Basin Royalty Trust operates as an express trust. The company has a 75% net overriding royalty interest carved out of Burlington Resources Oil & Gas Company LP's oil and gas leasehold interests (the underlying properties) located in the San Juan Basin in northwestern New Mexico. The underlying properties consist of working interests, royalty interests, overriding royalty interests, and other contractual rights in 119,000 net producing acres in San Juan, Rio Arriba, and Sandoval Counties of northwestern New Mexico, as well as 1,180.5 net wells. Compass Bank serves as the trustee of the San Juan Basin Royalty Trust. The company was founded in 1980 and is based in Fort Worth, Texas.

2) Panhandle Oil and Gas Inc. (NYSE:PHX)

Sector Basic Materials
Industry Independent Oil & Gas
Market Cap $238.30M
Beta 0.87

PHX stock chart

Key Metrics

Operating Profit Margin 27.79%
Net Margin 19.70%
Debt/Equity Ratio 0.10
Short Interest 2.54%

Panhandle Oil and Gas Inc. engages in the acquisition, management, and development of oil and natural gas properties. The company's mineral and leasehold properties are located primarily in Arkansas, New Mexico, North Dakota, Oklahoma, and Texas. As of September 30, 2011, it owned 255,857 net mineral acres; leased 17,480 net acres; held working and royalty interests in 5,107 producing oil and natural gas wells; and operated 48 wells in the process of being drilled. It serves pipeline and marketing companies. Panhandle Oil and Gas Inc. was founded in 1926 and is based in Oklahoma City, Oklahoma.

3) Permian Basin Royalty Trust (NYSE:PBT)

Sector Basic Materials
Industry Independent Oil & Gas
Market Cap $725.72M
Beta 0.63

PBT stock chart

Key Metrics

Operating Profit Margin 98.27%
Net Margin 98.27%
Debt/Equity Ratio 0.00
Short Interest 1.10%

Permian Basin Royalty Trust owns overriding royalty interests in various oil and gas properties in the United States. The company holds a 75% net overriding royalty interest in the Waddell Ranch properties that consist of Dune, Judkins, McKnight, Tubb, University-Waddell, and Waddell fields located in Crane County, Texas; and a 95% net overriding royalty interest in Texas Royalty properties, which include royalty interests in various producing oil fields, such as Yates, Wasson, Sand Hills, East Texas, Kelly-Snyder, Panhandle Regular, N. Cowden, Todd, Keystone, Kermit, McElroy, Howard-Glasscock, Seminole, and others located in 33 counties in Texas. As of December 31, 2011, its Waddell Ranch properties contained 340 net productive oil wells, 88 net productive gas wells, and 109 net injection wells. The company's Texas Royalty properties consist of approximately 125 separate royalty interests containing approximately 51,000 net producing acres. Permian Basin Royalty Trust was founded in 1980 and is based in Dallas, Texas.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/03/2012.

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

Business Relationship Disclaimer: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.