With the price of oil over $80 a barrel, many are expecting oil to surge into the $90s as the weather warms up and more and more Americans begin to take their annual roadtrips. While the price of crude has been volatile to say the least in the past 18 months, there is little doubt that firms in the oil and gas industry should see some healthy revenue numbers going into the summer months and several have seen their share prices rise substantially in the past weeks in anticipation of an energy bull market.
Not only have the following stocks recently seen their value climb significantly, they also offer shareholders impressive dividend yields, which only sweetens the deal for potential investors.
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Western Canadian Oil Plays
Beginning in the great white north, Penn West Energy Trust (NYSE: PWE) is an open-ended investment trust that focuses on holding interests in the oil and gas sector in the Western Canadian Sedimentary Basin. In fact, Penn West is the largest conventional oil and gas producing income trust in North America, with over 175,000 BOE per day in fiscal 2009. Like the rest of the market, PWE has exploded up over 150% in the past year, and energy traders have sent the stock up 23% in the past month alone. Add to the obvious momentum a dividend yield of 7.8% and Penn West looks pretty good right now.
If Penn West peaked your interest, you should take a closer look at Pengrowth Energy Trust (NYSE: PGH) and Enerplus Resources Fund (NYSE: ERF), both of which are Canadian oil sands energy trusts that have been rallying as of late and offer their shareholders a substantial dividend as well.
Texan Natural Gas
Going from the Canadian oil sands to the wide-open range of the north Texas Barnett shale, Quicksilver Gas Services (NYSE: KGS) is a midstream operation that is in the business of gathering and processing natural gas. While the natural gas industry largely struggled for the most part in 2009 due to high inventories, Quicksilver enjoyed a record year, bringing in earnings of $33.2 million in 2009 ($1.21 per diluted share) - up 26% from 2008. The news only added to the stock's momentum, which is up 5% since the latest earnings announcement and up 10% in the past month. While I myself still have questions about the natural gas sector, Quicksilver's 7.4% yield certainly makes me think twice about possibly riding this recent momentum in the sector.
Genesis Energy (Amex: GEL) is another energy player that focuses on the midstream, providing services to integrated companies and oil refiners. The limited partnership suffered a net loss of $6 million in fourth quarter 2009 and a year-over-year decrease in net income of 69%, but unitholders only saw a decrease of 14% per unit (59 cents to 51 cents). All that being said, Genesis' disappointing 2009 results haven't stopped the company's stock from shooting up 15% in the past four weeks, setting a new 52-week high in the process. Again, the stock's 6.7% dividend yield is another good reason to take a good long look at the stock if you're looking for more exposure in the energy sector.
Finally we have Targa Resources (NYSE: NGLS), which is another integrated midstream operator that focuses on natural gas and natural gas liquid. Targa owns or operates over 11,300 miles of natural gas gathering and NGL pipelines and 22 processing plants, primarily in the Gulf Coast. Targa had a rough first three quarters to 2009, but came through with a huge fourth quarter, reporting net income of $38.4 million (56 cents per diluted share) beating analysts estimates by a whopping 18 cents. Targa executives attributed the beat primarily to the company's strong downstream business, which benefited from weather as well as numerous year-end take-or-pay contracts within their logistics division. Targa shares are up over 7% since the earnings announcement and 12% since the middle of February. Targa's healthy 7.85% dividend is also a nice reason to dig deeper into Targa's financials if you're looking for more info on the firm.
With a number of oil and gas firms enjoying a recent run-up in anticipation of strong spring/summer revenues, keep your eyes on the companies listed as potential investments that will reward you with healthy dividends to go with promising earnings outlooks. (To learn more, check out our Oil And Gas Industry Primer.)
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