3 Small-Cap Oil Stocks Worth A Look

Includes: CPX, EGC, IOC
by: James Hartje

Continuing the week of top energy investment ideas, we decided to switch it up from the mega-giant energy companies like Halliburton (NYSE:HAL) and Schlumberger (NYSE:SLB) and recommend some of the top smaller named energy companies. Below are our top three favorite small-cap energy plays:

Complete Production Services (NYSE: CPX)

CPX provides oil and gas companies with products and services to help develop hydrocarbon reserves. With a PEG Ratio of 0.6, P/S of 1.13, Forward P/E of 6.64, ROE of 21%, and ROA of 12%, CPX owns a very impressive book of businesses; one to brag about and one that makes every investor envious. The company’s sales numbers are equally impressive. Net income has tripled over the past year, total revenue has nearly doubled, and with the company reinvesting $100 million into new capital expenditures the future looks very bright for CPX. The fact is we aren’t the only ones who think so; 89% of the stock is institutionally held, a ridiculous 13% of the company is held by insiders, 90% of analysts rate CVX as a Strong Buy, and overall we see no reason to why CPX cannot nearly double within the next year, rising to $50 a share, total yield of 86%.

InterOil Corporation (NYSE: IOC)

IOC is an independent energy company that operates in the upstream, midstream, and downstream business segments. Net profits within the 2nd quarter jumped from $7.8 million in 2010, to $23.5 million in 2011, with total revenue rising from $225 million to $304 million. Improved performance across the board and the signing of an enormous contract in Papua New Guinea provides strong guidance heading into 2012. With an impressive 83% buy rating; analysts see an 85% upside on the stock over the course of the next year with shares soaring to $110.

Energy XXI Bermuda (NASDAQGS: EXXI)

EXXI is an independent oil and natural gas exploration and production company. The majority of the business is focused in the U.S. Gulf Coast and the Gulf of Mexico. EXXI’s recent acquisitions of certain Gulf of Mexico properties has led to a significant increase in total sales, revenue, and profit. In addition to this, increased production and cash flows helped strengthen the company’ balance sheet and went a long way toward reducing its debt by over $200 million. The stock also holds a strong PEG Ratio of 1 and a strong P/S Ratio of 2.26. On top of this, the stock is trading at 10.3 times estimated 2011 earnings and of the 14 analysts who cover the stock, 13 rate it as a Buy. The future looks bright for EXXI and we expect the stock to yield a total annual return of 60%, rising to $40 per share.

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