Many oil stocks were beaten up in 2016 as oil prices continued to be depressed. However, toward the end of the year, some relief came in sight. The Organization of Petroleum Exporting Countries (OPEC) made moves to help relieve the oil oversupply that has been keeping prices down.

Two OPEC agreements to limit production gave oil a boost over the $50-per-barrel mark, but prices have dropped back below that level on several occasions. While West Texas Intermediate (WTI) is over $54 per barrel at the time of this writing, the U.S. Energy Information Administration (EIA) forecasts an average price of $50.85 for the fourth quarter of 2017, indicating that it may be difficult for prices to hold onto recent gains through year end. Companies that have been holding back on production may continue to do so until they can expect a reasonable return on investment (ROI). (See also: API Reports 4.08M Barrel Inventory Draw, WTI Oil Price Dips on Gasoline Disappointment.)

These four stocks are poised to turn higher oil prices into profits. Each of these companies has been gathering assets that will produce income in the remainder of the year and into 2018. They have managed to survive through efficiency measures and are ready to expand if oil continues to climb higher. All figures are current as of Nov. 2, 2017.

EOG Resources, Inc. (EOG​)

EOG Resources is unique in its approach to choosing drilling sites. It looks for premium sites that can produce a minimum 60% after-tax real rate of return when oil is at $50 per barrel or better. With oil prices continuing to test the $50 level, the company says it can still be profitable. EOG has used the period of depressed oil prices to divest itself of non-premium sites and focus on acquiring premium ones. EOG acquired Yates Petroleum in 2016, giving it extensive acreage in the Delaware Basin, where the company can use larger rigs to increase productivity and efficiency.

The stock entered a downward price channel in December 2016. However, revenues have risen for the past four quarters, helping the company cut its income losses, and its past two quarterly reports showed positive income. The stock found a bottom at around $84 per share in August 2017 and has skyrocketed since then, reaching over $100 per share. (For more, see: EOG Resources Earnings Miss and Revenues Beat in Q2.)

Comstock Resources, Inc. (CRK)

Comstock Resources, based in Frisco, Texas, may be the quietest success story in the oil patch. The stock had two breakouts in August 2016, and since its peak of around $13 per share in February 2017, it has been forming a base. The base is smooth and orderly, and if the stock completes this base, it could break out toward the end of the year.

The company has posted two consecutive quarters of increased revenues and positive operating income. Comstock formed a joint development venture with USG Properties Haynesville on Jan. 9, 2017, and it now has access to an additional 3,315 acres that will bear 20 wells. (See also: Comstock Q2 Loss Narrower Than Expected, Sales Miss.)

  • Average Volume: 203,890
  • Market Cap: $79.546 million
  • P/E Ratio (TTM): -0.55
  • EPS (TTM): -$9.39
  • Dividend and Yield: 0.00 (0.00%)
  • One-Year Target Estimate: $9.86

Devon Energy Corporation (DVN)

Looking at the fundamentals for Devon Energy, the company reported positive income in the past four quarters. In December 2016, the stock entered a downward price channel, but it may have hit a bottom in mid-2017, recovering to over $38 at the time of this writing from a low of around $30 in August.

With the oil surplus predicted to end in late 2017 according to the EIA, Devon shares could continue to rise. Investors can either wait for another temporary dip in the stock price or buy into the current upward momentum. This Oklahoma-based company has been in business since 1971, so it is likely here to stay. (For more, see: Devon Energy Profit Beats Estimates; Capex Lower Than Planned.)

  • Average Volume: 4,182,226
  • Market Cap: $20.46 billion
  • P/E Ratio (TTM): 8.81
  • EPS (TTM): $4.42
  • Dividend and Yield: $0.24 (0.65%)
  • One-Year Target Estimate: $41.48

Enterprise Products Partners L.P. (EPD)

Enterprise Products Partners is not a driller – it is a pipeline and storage company. Thus, it is less susceptible to the price of oil because it has paying contracts with companies for the transportation and storage of their oil. The company also runs export docks and exports liquefied petroleum gas. Enterprise Products Partners is no newcomer to the oil field, having been established in 1968.

The stock pulled out of a long downturn in November 2016 and rose until February 2017, when it began forming its current base. Although the stock is down roughly 10% overall in 2017, the average price target of $31.83 implies room for significant growth for the remainder of the year and into 2018. (See also: Enterprise Products Misses on Q2 Earnings and Revenues.)

  • Average Volume: 5,273,535
  • Market Cap: $53.08 billion
  • P/E Ratio (TTM): 19.43
  • EPS (TTM): $1.27
  • Dividend and Yield: $1.67 (6.81%)
  • One-Year Target Estimate: $31.83

The Bottom Line

Some of the smaller names in the energy sector are poised to produce exceptional gains in 2017 if oil prices remain above $50 per barrel. Investors should watch the price of oil and perform due diligence on each of these stocks to make sure that they are taking advantage of potential relief from the oil oversupply. (See also: What Determines Oil Prices?)

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