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Monday June 04, 2012
'Cheap' stocks in oil & gas
by Lou Gagliardi, editor Cabot Global Energy Investor In my latest report, I took a look at the relative market price to 2012 earnings (P/E) valuations across several energy sub-sectors to discern which stocks are cheap. I found several that are not only cheap, but have potential catalysts. The most attractive stocks are Suncor Energy (SU), Nabors Industries (NBR) and Carrizo (CRZO). Suncor sports an 8 multiple to earnings despite positive free cash fl ow in 2012, 20% earnings growth 2011 to 2012, and production growth in 2012 expected to reach 10%. With a high exposure to lower crude prices (a nearly 90% oil weighting), it is trading near its 52-week lows. Nabors is a long-term restructuring/turnaround story with more upside than downside potential as it sheds non-core assets and seeks to pivot the company to higher growth areas. Carrizo is still predominately a gas producer transitioning to an oilier producer with tighter boosting the upside in its acreage. Across the E&P sub-sector, P/E valuations are still rich with the median multiple at 13.3 times 2012 earnings, and many of these E&Ps are significant gas producers. The one company that stands out as a 'surprise' among cheap stocks is Apache (APA), a U.S. E&P with significant international exposure. It also has a long history of growth through selective acquisitions. Apache has an impressive geographically diverse asset base, a balanced weighting to oil and natural gas production (roughly 50/50), exposure to LNG export projects in Australia and Canada, good production growth prospects and a strong balance sheet. Learn more about this financial newsletter at Lou Gagliardi's Cabot Global Energy Investor. Related articles: 
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