Profit on the Oil Bust With These 10 Cheap Energy Stocks

By Tim Lemke on 11 February 2015 0 comments

The recent decline in oil prices has certainly been great news for motorists, who have seen gasoline prices fall to their lowest prices in years. But with crude oil prices below $50, it's hard for many companies in the oil industry to make a profit, and their share prices have declined accordingly.

But don't run away from these stocks — many are quality holdings which are likely to rise again when oil rebounds. In fact, you might consider scooping some of these up on the cheap, and turning a profit when prices climb again.

Here's a look at 10 high-quality energy stocks and ETFs that have been hammered in recent months.

1. iShares Oil and Gas ETF [NYSE: IEO]

As of the first week of February, shares were down more than 12% over the past 52 weeks. This ETF includes holdings in some of the largest oil and gas companies in America, and seeks to track the Dow Jones U.S. Select Oil Exploration & Production Index. Full disclosure: I bought a small number of shares back in December, assuming oil prices weren't getting much lower. It's been a good bet so far, as I've seen shares rise about 6%. But it will be a while before we see shares get back to levels from even a year ago.

2. iShares U.S. Oil Equipment and Services ETF [NYSE: IEZ]

Like the broader Oil and Gas ETF, shares have been pounded since the drop in oil prices began. Shares of IEZ are now 25% less valuable than they were a year ago, and are down more than 35% in the last 6 months. This ETF has holdings in some of the largest gas equipment companies, most of whom have seen their shares take a dive.

3. SPDR S&P Oil & Gas Equipment & Services ETF [NYSE: XES]

This exchange-traded fund tracks the oil and gas equipment sector, and has been hammered over the last year. Shares are down 38% in the past 12 months, and dropped 20% during one brutal two-week period in November.

4. ExxonMobil [NYSE: XOM]

There was a time when ExxonMobil was the largest company in the world. Low crude oil prices have put a dent in the company's overall market cap, but it's still a huge company, with revenues of $32.5 billion in 2014. Fourth-quarter earnings were about $6.6 billion, or 21% lower than the same quarter in 2013. Shares are down about 11% since a 52-week high in July.

5. Halliburton [NYSE: HAL]

Down nearly 40% in the last year, this gargantuan oilfield services firm has not been immune to the lowering of oil prices. Halliburton is heavily involved in the extraction of shale oil, which has helped boost overall production in the U.S. But this extraction process is expensive, and peak oil flows don't last long. Thus, it may be some time before prices rebound to previous levels. Value investors, however, might get excited at the notion of buying shares of a large firm like this for near $40, and share prices did rise slightly at the end of January.

6. Schlumberger [NYSE: SLB]

Shares of this Houston-based Halliburton competitor reached as high as $118 in July of last year, but then tumbled to under $76 within six months. They've crept up a bit since, but are still more than 7% off of the 52-week high. The company announced layoffs of about 9,000 workers in January, citing a slowdown in drilling activity.

7. Conoco Phillips [NYSE: COP]

In late January, the nation's third-largest oil company said it would reduce its spending on oil exploration this year. Conoco reported a $39 million loss for the fourth quarter, down from a profit of $2.5 billion the year prior. As the company fights to make money with crude oil prices so low, shares of Conoco have fallen by about 25% since July.

8. Chevron [NYSE: CVX]

One of the world's largest oil producers, Chevron is still trading above $100. But shares are down more than 11% from a 52-week high. The company reported fourth quarter earnings of $3.5 billion — still a huge chunk of change — but down from $4.9 billion during the same quarter a year prior. Chevron said it will spend 13% less in oil exploration this year than in 2014.

9. Whiting Petroleum [NYSE: WLL]

This company has big oil operations in North Dakota and in the Rocky Mountains, and has had one rocky year. Whiting is one company known to have share prices correlate strongly with the price of oil, and shares have been brutalized in the last year, down a full 48% in 52 weeks and a whopping 60 points (66%) since September. Whiting completed a deal for Kodiak Oil & Gas in December; the value of the all-stock deal was nearly half of its initial proposed price.

10. Continental Resources [NYSE: CLR]

Like Whiting, Continental's share prices track closely with oil prices, so it's been a tough road for the company recently. Shares are down 16% over the last 52 weeks and 40% since September. Continental said it plans to operate 31 rigs in 2015, down from 50 in 2014. There is some good news for Continental, as shares are up $14, or 43% since mid-December.

Are you dumping oil and energy stocks, or loading up on them now that they're cheap?

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