Oil Companies with a Chance to Grow

Joel Anderson |

BRY, EOG, GEOI, LPR, SM, oil, crude oil, demand, natural gas, gas, Europe, global demand, debt crisis, PEG, EPS, EPS growthMarkets around the world seem to be at the whim of the Yo-Yo that is news out of Europe, but one market in particular has been notably affected of late: crude oil. Crude oil prices tend to be linked to economic activity in general, and a depressed European economy could mean decreased demand. However, should Europe emerge from the debt crisis in anything less than a state of catastrophe, it's entirely possible that strong oil producers will be well positioned to gain from increased demand on both sides of the pond will make significant gains.

Five Companies with Strong Outlook

If the situation in Europe is resolved without catastrophe, there's a real chance that crude prices will jump as a result. With this in mind, the right independent oil and gas company could provide an opportunity for real growth. But with a glut of potential companies to follow, it's not always clear which stocks are on the rise and which are flirting with disaster. To simplify matters, here are five major independent oil and gas producers who have metrics that might point to long-term growth. Each has a PEG of under one, each has projected EPS to grow by 25 percent or more in the next year, and each has an average analyst recommendation of "buy" or better.

EOG Resources, Inc. (EOG)

EOG Resources is the biggest of the companies meeting our criteria with a market cap exceeding $28 billion, and its long term prospects should be clear. The Houston-based company controls proven reserves in the United States, Canada, Trinidad and Tobago, the United Kingdom, and China. Emerging from Enron as part of an extremely timely spin-off in 1999, EOG has had an up and down year. Share prices are up a little over 6.25 percent on the year, but their EPS has shrank 70 percent in 2011. However, with a PEG of 0.76 and EPS projected to grow 28.70 percent next year, EOG's outlook remains strong.

SM Energy Company (SM)

SM Energy is an American company engaged in natural gas and crude oil acquisition and development, focusing on oil- and liquids-rich resource plays. SM Energy has assets spread across North America, including the South Texas & Gulf Coast Region, Rocky Mountain Region, Mid-Continent Region, ArkLaTex Region, and Permian Region. SM Energy has had a solid year in 2011, posting gains in share value approaching 30 percent and an eye-popping EPS growth of 291.25 percent. While 2012 could hardly be expected to produce the same results, their PEG of 0.30 and projected EPS growth of 55.94 percent could point to good things to come.

Berry Petroleum Company (BRY)

Berry petroleum began when Clarence J. Berry began exploring for oil in the Klondike Fields of Central California and has now grown to a company with a market cap of $2.25 billion. Berry is a three-basin company with resources in the Uinta Basin in Utah, the Permiam Basin in Texas and the San Joaquin Basin in California. Berry's share price has declined some 6 percent over the course of 2011 despite their EPS jumping 48.1 percent. Now, with a PEG of 0.58 and projected EPS growth to top 40 percent again next year, Berry may be looking like an attractive buy to some investors.

GeoResources, Inc. (GEOI)

GeoResources was incorporated in 1958 and remains focused on acquisition and development of petroleum resources in the Southwest, Gulf Coast and the Williston Basin. GeoResources has also active in the Bakken Shale in North Dakota since October of 2009 when it initiated a leasing program in Williams County, ND. GeoResources saw their shares begin a steady ascent in early 2009 that peaked out in March of this year after an increase of over 420 percent in just two years. While 2011 has had its ups and downs, the company still boasts a PEG of 0.90, EPS growth this year of almost 100 percent, and projected EPS of another 43.18 percent next year.

Lone Pine Resources Inc (LPR)

Lone Pine Resources is also the lone non-American company crashing this party. The Canadian-based company engaged in exploration and development of oil properties in Alberta, British Columbia, Quebec and the Northwest Territories.  Lone Pine is both the smallest of these companies (market cap of just over $600 million) as well as the youngest (incorporated in September of 2010), but it also has the statistics of a company with room to grow. With a microscopic PEG of 0.07 and projected EPS growth of over 115 percent next year, Lone Pine appears poised to make gains in just its second year as a publicly traded company.

Growing Global Demand Could Fuel Bounce

While speculation on the price of crude oil remains a dicey business, it is clear that global demand should be on the rise in the long term. With global population reaching 7 billion plus this year and the middle classes in India and China growing steadily, those oil companies that are positioned well could be in for some strong returns.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
DRD DRDGOLD Limited American Depositary Shares 5.04 -0.07 -1.37 210,517
EOG EOG Resources Inc. 89.26 -0.49 -0.55 2,131,450
SM SM Energy Company 34.12 -0.44 -1.27 2,433,570

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