Buy these stocks to get rich from the oil and gas boom

 

Oil prices have been on the rise through the summer, and as a result plenty of stocks in the oil and gas industry have climbed to new all-time highs.

The rise in oil prices can be traced back to several geopolitical problems around the globe. The conflict between Russia and Ukraine poses a serious threat to access to Russia's massive oil supply, and violence between Israel and Hamas raises concern over the stability of Middle East oil supplies.

Russia is the second largest oil exporter behind Saudi Arabia, but the longer its battle with Ukraine lasts, the higher the likelihood that serious sanctions could put a crimp in the nation's oil exports. If it gets to a point where the EU is forced to cut trade with Russia, oil prices are going to skyrocket, and could easily head north of $200 a barrel.

The Middle East is always going to be concern since tensions are always lingering just under the surface, and the conflict between Israel and Hamas creates a situation where neighboring nations could get pulled into the fighting and cause supply disruptions from the entire region.

Consequently, oil prices have been rising, and companies such as Exxon Mobil (XOM) and Chevron (CVX) have seen their stocks rise to new 52-week highs recently.

With neither conflict nearing an end, oil prices are likely to trend higher through the remainder of the summer, taking oil and gas stocks higher along the way. I am bullish on the entire sector, but believe there are some stocks that are better than others at the current time. This week we are going to look at a handful of oil and gas stocks that are poised to build on recent gains.

Noble Corp.

U.K.-based Noble Corp. (NE) is an offshore drilling contractor for the oil and gas industry. The stock has risen 12.9% after hitting its 52-week low back in March, but it still remains attractively priced, with a price-to-earnings ratio of just 9.3. Analysts are not expecting huge earnings growth moving forward, but do expect to see 5% growth in 2015 compared to 2014, which is enough to keep the stock moving in the right direction, especially considering its current low valuation. The company last reported earnings in April, and shattered the consensus estimate of $0.69 with actual earnings of $0.99. The earnings beat was the catalyst for Noble's recent upward momentum, and another strong earnings report on July 30 would send the stock even higher.


Chart courtesy of stockcharts.com

ConocoPhillips

Houston-based oil company ConocoPhillips (COP) is not unlike the other major oil companies in that it too has recently surged to a new all-time high. What separates ConocoPhillips from its peers is that it still has a low valuation, indicating that there is more upside potential. COP currently has a P/E of 11.5, which is more favorable than Exxon's (XOM) 14 and Chevron's (CVX) 13. Unlike Exxon, the company is expected to grow its earnings in 2015. Granted, analysts have forecast earnings growth of just 0.3% in 2015, but that is still better than the negative 0.4% growth Exxon is expected to report. COP has a strong track record of posting better than expected earnings, having outpaced analyst estimates seven out of the last eight quarters, and the one quarter when it did not beat estimates it still reported earnings in-line with the consensus estimate. The company will next report earnings on July 31, and should it once again post better than expected numbers. I expect to see the stock trade to a valuation closer to its peers.


Chart courtesy of stockcharts.com

Cheniere Energy

Cheniere Energy, Inc. (LNG) is a play in the natural gas sector, as the company manages and develops natural gas importing and exporting facilities. The stock has been a steady winner over the last year, and is still trending higher. Global demand for natural gas has soared over the last decade, having doubled since 2000, and is expected to double again between now and 2025. The natural gas explosion in the U.S. is huge for companies such as Cheniere, which already has a new export facility under construction in Louisiana. The U.S. has been slow to approve more export licenses, but as it picks up the pace, Cheniere will benefit from more projects and higher export volumes. I like the sector, and believe Cheniere is a great play for future growth.


Chart courtesy of stockcharts.com

Hess Corporation

Hess Corporation (HES) is a New York-based oil and gas company that develops, produces and sells oil and natural gas around the globe. The stock has been a strong performer in 2014, having gained 21.0% on the year. The company's last earnings report at the end of April shattered analyst estimates, and the company will next report on July 30. Even with the solid gains the stock has enjoyed as of late, its valuation remains extremely attractive, with a P/E of just 8. Analysts expect the company to experience a 3% drop in earnings in 2015, but given how low the stock is currently valued, the earnings dip should not impact the stock as long as the company is able to keep pace with the consensus estimate. The expected earnings decline has already been priced into the stock, so it should not cause too much concern. Considering that the industry, on average, trades with a P/E of 19 there is still plenty of upside to the stock. Even with the stock trading near its all-time high, I see a lot of upside potential and very limited downside risk.


Chart courtesy of stockcharts.com

Occidental Petroleum

Occidental Petroleum (OXY) is another oil and gas stock that has enjoyed big gains as of late but continues to trade at a discount. After running into trouble during the first two months of the year, the stock is up over 16% since its low in February, and currently is trading near its 52-week high. Even with the stock trading so close to its 52-week high, it is currently trading with a price-to-earnings ratio of just 13.5. Looking ahead, analysts have forecast 2% earnings growth in 2015. The company has a solid earnings track record, having outpaced the consensus estimate seven out of the last eight quarters. OXY will next report on July 31, with analysts forecasting earnings of $1.75 per share, up from $1.58 during the same period last year. With the stock's low valuation, shares should continue to trend higher along with the overall industry.


Chart courtesy of stockcharts.com

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.


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Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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