The outlook for the global oil industry is not very upbeat with the OPEC countries predicting stagnant prices in 2014. Meanwhile, the supply is likely to be strong in the United States amid the continuing shale revolution. As such, oil producers are not expected to be outperformers, but integrated players such as American Eagle Energy Corp (NYSEMKT: AMZG) and Petroquest Energy Inc. (NYSE: PQ) have a lot going in their favor. Here is a closer look.
On the surface, there is nothing remarkable about Colorado based American Eagle Energy Corp which operates in Nevada, Utah, Texas, Colorado, and North Dakota in the United States, in addition to southeastern Saskatchewan in Canada. The company has a market capitalization of just $109 million and produced a loss of $9.3 million on sales of $10.7 million last year. This is obviously not something anyone would like to add to their portfolio. However, the situation does not appear that bad when seen in conjunction with the fact that the company started meaningful operation last year only.
In the latest quarter ended September 30, 2013, the company registered $11.6 million in top line, higher than the revenue earned in full year 2012. Although bottom line suffered as a result of early payment of debt, its nine month results clearly depict material changes in fundamental operations. Top line grew from $5.8 million to $29.6 million while profits stood at $2 million. A wide majority of sales and profits of the company comes from its Spyglass property in the Bakken formation where it plans to drill 15 gross wells next year. Even if oil prices remain flat, investors can expect a sharp increase in key metrics as American Eagle Energy pumps more oil. A forward price earnings ratio of 13.5 indicates earnings will likely rise next year.
Louisiana based Petroquest Energy Inc., which has operations in Oklahoma, Texas, the Gulf Coast Basin, Arkansas, and Wyoming pretty much shares the case of surging production. Petroquest's production is increasing as a result of acquisitions it made in July in shallow water Gulf of Mexico. As a result, its top line grew 63.7 percent in the third quarter to $55.6 million while the bottom line swung to a small profit of $1.7 million, compared to a loss of $37.3 million. Although the $188 million acquisition increased the company's leverage to 4.3, it may be preferred for profitable operations. A recent technical correction in the stock price has reduced its forward price earnings ratio to an attractive 8.1.