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Stern Agee recently came out with a call speculating that the long oil/short natural gas play is in its late innings, as natural gas prices have bounced some 50% off its low earlier this year. It also highlighted three energy firms that should do well as these trends continue to reverse. Two of those picks are highlighted below. Both sport reasonable valuations and good growth prospects.

Energen Corporation (NYSE:EGN) is a natural gas and oil E&P firm with assets in the continental United States. The company distributes natural gas to residential, commercial, and industrial customers, as well as other end-users of natural gas in central and north Alabama.

Four reasons EGN is a solid pick at $51 a share:

  1. The company has easily beat earnings estimates the last two quarters, and the stock is selling at just 11.5 times forward earnings.
  2. The stock is cheap at just five times operating cash flow and just 38% over book value.
  3. S&P has a "buy" rating on the stock, and its fair value calculation shows a $60.30 a share on EGN. TheStreet also has a "buy" rating and a $60 price target on the stock. Imperial Capital initiated the shares an "outperform" in mid-August.
  4. The company is a major player in the Permian Basin. It expects oil and liquids production to almost double from FY2010 through FY2013. It also expects oil and liquids to be over 50% of production for FY2013, up from around the 45% level it estimates for year-end FY2012.

Oasis Petroleum (NYSE:OAS) is an independent exploration and production company with oil and natural gas resources in the Montana and North Dakota regions of the Williston Basin.

4 reasons OAS is a good growth play at $30 a share:

  1. The 19 analysts that cover the stock have a median price target of $39 a share on OAS, 30% above the current stock price.
  2. The company is on track for just under 100% revenue growth in FY2012. Analysts currently expect approximately 50% sale increases in FY2013. The stock sports a five-year projected PEG of under 1 (.61).
  3. Consensus earnings estimates for both FY2012 and FY2013 have moved up nicely over the last two months. OAS sells for 13.3 times forward earnings, almost half its historical average (25.4).
  4. EPS growth is impressive. The company made just 88 cents a share in FY2011, but is likely to post over $1.40 in earnings for FY2012. Analysts expect that to move up past $2.25 a share in FY2013.
Source: Highlighting 2 Of Stern Agee's Recent Energy Recommendations