3 Oil Stocks to Explore as Q4 Wraps Up
The prospects of the oil industry, the Exploration and Production
(E&P) sector in particular, are largely tied to the related
commodities. The oil/natural gas-focused stocks thus stands to
benefit from the recent momentum in crude oil and natural gas
During the last few months, crude prices have mostly traded in the
$95-$105 per barrel range on a positive demand outlook for heating
oil amid below-normal temperatures that prevailed most of winter.
Further support came from Janet Yellen's reassuring Fed commentary
and strong January trade data from China.
Meanwhile, natural gas has also been on a tear. After hovering near
the 3.5 per million Btu level for most of 2013, the prices have now
spiked to around $6. The single most important contributor to this
upward pressure was the powerful winter snowstorm in the U.S. and
Canada that called for higher consumption of heating fuels.
Additionally, with rapid development and urbanization of emerging
nations, energy demand is on the rise. The U.S. Energy Information
Administration (EIA) foresees growth in global liquids consumption.
Natural gas demand also shows a similar trend, spurred by its cost
effectiveness and abundant supply in North America. The oil and
natural gas producers are most suited to benefit from this
With over 75% of oil sector companies having already reported, we
lie in the last leg of the Q4 earnings releases. For those
investors who have missed out on investment opportunities offered
by the sector so far this earnings season, here are some options
that can still be explored.
Picking the Right Stocks
With the wide array of companies in the sector muddling up the
stock picking power, the Zacks methodology could offer some relief.
One could narrow down the list using the positive Zacks
as a guide, along with a favorable Zacks Rank - Zacks Rank #1
(Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP is our proprietary methodology for identifying stocks
that have high chances of surprising in their next earnings
announcement. It shows the percentage difference between the Most
Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the
chance of a positive earnings surprise is as high as 70%.
Here are three E&P stocks that are poised to beat estimates
according to our methodology:
EPL Oil & Gas, Inc
) has an earnings ESP of +15.15% and a Zacks Rank #3. The Zacks
Consensus Estimate is pegged at 33 cents per share. 2013 marked a
good year for EPL with stocks gaining over 18%.
Last month, the company made a $70.4 million acquisition, gaining
properties in the shallow-water central Gulf of Mexico. These oil
producing assets will add value to the company's existing
portfolio. Additionally, the company announced growth in its oil
assets, which could prove lucrative keeping in mind the oil price
The Houston, Texas-based company is slated to release its fourth
quarter results on Feb 27.
Gulfport Energy Corp
) delivered positive earnings surprises in the trailing two
quarters and the future looks bright with an earnings ESP of
+11.11% and a Zacks Rank #3. The Zacks Consensus Estimate for the
fourth quarter is 18 cents per share.
The stock has gained over 75% in the past one-year time frame.
Moreover, last month, the company gave a stellar 2013 production
update, stating 340% year-over-year growth. The company holds
properties in the lucrative Bakken and Utica plays in addition to
the Niobrara Formation.
The Oklahoma-headquartered company is set to report its fourth
quarter results on Feb 26.
Southwestern Energy Co.
) had a superb 2013 having surpassed the Zacks Consensus Estimate
in three out of four quarters. For the upcoming release,
Southwestern has an earnings ESP of +1.92% and a Zacks Rank #3.
The stock has also soared over 30% in the last one-year time frame.
Southwestern is engaged in the development and production of oil
and natural gas, mostly in the U.S.
The Houston, Texas-based company will release its fourth quarter
results on Feb 27.
Despite the volatile nature of the underlying commodities, the oil
and gas sector is slowly but steadily growing on the back of
ever-increasing energy demand. Moreover, with technological
advancement, the E&P companies are able to generate higher
production with lower costs, bringing in the much needed efficiency
EPL OIL&GAS INC (EPL): Free Stock Analysis
GULFPORT ENGY (GPOR): Free Stock Analysis
SOUTHWESTRN ENE (SWN): Free Stock Analysis
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