Whiting Petroleum got a nice bump in early trading this morning on rumors Statoil (STO) was preparing a $65 a share buyout of this cheap E&P concern. The stock rose better than 10% before Statoil came out to deny the rumor. However, the fact that rumor was believable gives some insight on how cheap this energy producer is over the long term. For speculative growth investors, it looks worth establishing a position in.
Whiting Petroleum Corporation (WLL) is an independent energy concern producing oil and gas primarily in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast, and Michigan regions of the United States.
6 reasons WLL is undervalued at under $44 a share:
- The median analyst price target held by the 41 analysts that cover the stock is $59 a share, over 35% above the current stock price.
- The company is projected to grow revenues in low double digits for both FY2012 and FY2013. The stock sports a five year projected PEG of under 1 (.87).
- WLL sells for less than 12x forward earnings, a discount to its five year average (16.1).
- The company has tripled operating cash flow (OCF) over the past three years and the stock is selling at less than four times OCF.
- The stock is selling near the bottom of its five year valuation range based on P/E, P/CF, P/S and P/B.
- The company has 14 years of proven reserves at current production rates and 86% of its reserves are oil based.
Bottom line: The company has averaged better than 18% annual growth for both revenues and earnings over the past five years. An investor can pick this stock up now for just over 13x current earnings with a potential buyout as a kicker.
Disclosure: I am long WLL.