Many oil stocks have been beaten up recently, as oil prices were depressed. However, there has been some relief recently, with the Organization of Petroleum Exporting Countries (OPEC) making moves to help relieve the oversupply of oil that has been keeping prices down.
After a prolonged period of lower prices, West Texas Intermediate (WTI) reached prices of around $75 toward the end of June 2018 before ticking downward through the summer. After some renewed gains over the past month, WTI is currently trading at $72.63 per barrel. The U.S. Energy Information Administration (EIA) forecasts an average price of $73.05 for the fourth quarter of 2018, indicating that prices could remain near their recent highs over the next few months. Companies that have been holding back on production may continue to monitor price developments until they can ensure a reasonable return on investment (ROI).
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 final quarter of 2018. They have managed to survive through efficiency measures and are ready to expand if oil prices manage to climb higher. All figures are current as of Oct. 10, 2018.
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. The company says it can still be profitable even when oil prices are testing the $50 level. EOG used the period of depressed oil prices to divest itself of non-premium sites and focus on acquiring premium ones. The company acquired Yates Petroleum in 2016, giving it extensive acreage in the Delaware Basin, where EOG can use larger rigs to increase productivity and efficiency.
Revenues for EOG Resources have risen for the past four quarters, helping the company cut its income losses, and its past four quarterly reports showed positive income. Over the past year, the stock has consistently found support around the $100 level, and with the recent increase in oil prices, EOG shares reached an all-time high of over $133 in October. The stock is currently trading at $126.47 per share. (For more, see: 7 Oil Stocks That Can Gush Big Returns.)
Comstock Resources, based in Frisco, Texas, may be the quietest success story in the oil patch. After hitting a peak of around $13 per share in February 2017, Comstock shares began forming a base. The stock price hit a low of just over $4 per share in October 2017 and moved sharply higher in the final months the year. It reached a high near $10.50 in late January 2018 before declining sharply below $5, but the shares recovered rapidly along with the uptick in oil prices, more than doubling in price during April and May 2018. After some volatility over the summer, the stock has recovered along with resurgent oil prices and currently trades at $8.55.
The company posted three consecutive quarters of increased revenues, although operating income turned negative in the fourth quarter of 2017 after several quarters of positive results. Comstock formed a joint development venture with USG Properties Haynesville in January 2017, and it now has access to an additional 3,315 acres that will bear 20 wells.
- Average Volume: 524,147
- Market Cap: $905.702 million
- P/E Ratio (TTM): N/A
- EPS (TTM): -$8.78
- Dividend and Yield: N/A (N/A)
- One-Year Target Estimate: $11.44
Looking at the fundamentals for Devon Energy, the company reported positive income in the first three quarters of 2017 but saw negative income in the final quarter of the year. In December 2016, the stock entered a downward price channel, but it may have hit a bottom in mid-2017, recovering to over $44 in January 2018 from a low of around $30 in August 2017. However, in conjunction with the broader market volatility in 2018, the stock returned to near its August low in April. After recent gains in conjunction with rising oil prices, Devon Energy stock currently trades at $37.30.
If there is continued strength in oil prices, Devon shares could rise. This Oklahoma-based company has been in business since 1971, so it is likely here to stay.
- Average Volume:6,221,932
- Market Cap: $18.978 billion
- P/E Ratio (TTM): N/A
- EPS (TTM): -$0.48
- Dividend and Yield: $0.32 (0.80%)
- One-Year Target Estimate: $52.28
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 other 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 a base. After struggling to make progress throughout much of 2017, the shares posted significant gains into the end of the year, rising roughly 7.5% in the month of December. The upward momentum continued into January 2018, with Enterprise Products Partners stock approaching the $30 level. After some additional volatility this year, the stock is currently trading at $28.58.
- Average Volume: 3,712,915
- Market Cap: $62.189 billion
- P/E Ratio (TTM): 21.01
- EPS (TTM): $1.36
- Dividend and Yield: $1.73 (5.91%)
- One-Year Target Estimate: $33.43
The Bottom Line
Some of the smaller names in the energy sector are poised to produce exceptional gains in the final quarter of 2018 if oil prices regain their recent strength. 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 situation. (See also: What Determines Oil Prices?)