Oil stock earnings for many of the exploration and production companies plunged as crude oil fell from its record highs last year of $147.27 and as natural gas prices sank to 7-year lows. Drilling was silenced.
But in recent weeks, the oil stocks have been exhibiting new life and analysts have been boosting estimates. While many exploration companies are set to report quarterly earnings shortly, and estimates have been rising along with crude prices, the real action appears to be in the next few quarters, in 2010.
With the recovery underway, many are expecting oil demand to improve. Both OPEC and the International Energy Agency (IEA) have raised 2010 worldwide demand estimates in the last few weeks.
Furthermore, the Chinese recently announced 1 million car sales in a single month, 78% growth over a year ago, which will likely lead to rising Chinese oil consumption.
How do you benefit on future energy demand?
These 3 explorers are expected to show huge growth in 2010.
3 Oil Stocks with Increases in All the Right Places
Cimarex Energy (XEC - Snapshot Report) explores in the United States in the Mid-Continent, the Permian Basin, and the Gulf Coast. Even with lower crude prices in the first half of the year, 2009 hasn't been a total disappointment. Quarterly estimates continue to rise.
Oil stock earnings are also expected to grow by 116.79% in 2010 with the Zacks Consensus Estimate at $4.27 per share compared to 2009 expected earnings of $1.97.
Currently, Cimarex is trading with a forward P/E of 23.57, which is historically expensive. But looking forward, it's trading at just 11x 2010 earnings.
Cimarex oil stocks are a Zacks #3 Rank (hold) stock.
Gulfport Energy Corporation (GPOR - Snapshot Report) is a small U.S. explorer with properties in the Louisiana Gulf Coast and the Permian Basin in West Texas. It also has a 25% position in the Grizzly Oil Sands project in Alberta and is participating in wells in the Bakken play in the Williston Basin in North Dakota.
The 2009 Zacks Consensus Estimate is up 2 cents in the last 60 days to 47 cents. But it is really in 2010 where oil stock earnings growth will soar. Analysts predict an increase of 76.06% to 83 cents.
Gulfport has a history of anticipating estimates over the last four quarters. Its beats have been big, averaging 195.71%.
Gulfport oil stocks are trading at 18.5x forward 2009 earnings. But looking forward to 2010, its P/E drops to just 10.96.
Gulfport Energy is a Zacks #2 Rank (buy) stock.
Rosetta Resources Inc. (ROSE - Snapshot Report) explores in South Texas, the Rocky Mountains and the Sacramento Basin of California.
The 2009 Zacks Consensus Estimate rose 1 cent in just the last week to 42 cents. But, once again, the analysts are bullish on the company's prospects in 2010. Oil stock earnings are expected to grow 133.67% to 98 cents for 2010.
Currently, Rosetta Resources looks pricey, with a forward P/E of 40.3. Looking forward, based on 2010 projected earnings, its oils stocks are trading at a more reasonable 16.9x earnings.
Rosetta Resources is a Zacks #3 (hold) stock.
Oil Stocks Appear to Have a Bright Future
Every time you look into the future there is always a danger that the assumptions you use for your analysis will be wrong.
However, with crude at 52-week highs and companies in numerous industries declaring that the recession is over, analysts are predicting more desirable days for many of the exploration companies. Oil stock earnings, over the last few quarters, have been trending higher.
Oil stocks, which had been lagging since the March bottom, could finally be reappearing to the spotlight.
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