The spot price of oil is holding up and there are countless oil stocks pushing their highs.
If the 1990s were the decade for technology stocks, then the 2010s are the decade for independent oil producers.
While the largest integrated oil and gas companies are struggling to grow production, mid-tier, independent producers are filling the gap, and there are countless growth stories in the marketplace.
EOG Resources, Inc. (EOG) has been a top stock market performer and is likely to continue ticking higher. The company has net proven reserves of some 2,119 million barrels of oil equivalent, of which 94% is located in the United States.
Of the company’s total 2013 production, 88% came from the U.S. and Canada, representing a nine-percent gain over 2012.
First-quarter 2014 earnings were $661 million, compared to $495 million in the first quarter of 2013.
The company’s total crude oil and condensate production rose 42% over the comparable quarter last year, and management has significant hedges, locking in oil prices just under $100.00 a barrel. Approximately 30% of North American natural gas production is hedged for the remainder of 2014 at a weighted average price of $4.55 per million British thermal units (MMBtu).
The Street expects EOG Resources to grow its revenues by about 17% this year and about seven percent in 2015.
Previously in these pages, we looked at Cimarex Energy Co. (XEC), which has been very strong on the stock market since the beginning of February. (See “Where to Find the Best Price Momentum Right Now.”)
This oil and gas growth story is slowing, but the company is still expected to grow its full-year 2014 revenues by approximately 30% and all bets are off if oil prices start moving towards $110.00 a barrel for West Texas Intermediate (WTI).
And this is the fundamental investment risk with all resource investing—everything is tied to the spot price of the underlying commodity.
It’s as if speculating in resources has twice the investment risk of your basic startup. All’s well if the spread on the spot price is large enough to pay for the debt required to produce the commodity.
ConocoPhillips (COP) has been on a tear lately. The position was $65.00 a share four months ago; now it’s $80.00.
Currently sporting a 3.5% dividend yield, this global energy producer has doubled in value on the stock market over the last four years. And this does not include all the dividends paid.
ConocoPhillips has a very good track record of increasing its dividends, and considering its historical track record, it will soon be time for another.
For those who are interested, there’s definitely room for some exposure to energy in a balanced equity market portfolio.
But there’s no rush to do so. A good entry price should be the goal, which is more difficult now, as the juniors and mid-tier oil producers are mostly fully valued.
One popular energy company that’s recently been in consolidation, however, is Cabot Oil & Gas Corporation (COG). This position has been very hot the last few years, but it’s still a major growth story, so it will be interesting to see where the share price goes. It’s definitely a stock worth having on your radar now.