3 Oil Stocks That Should Recover From the "Crude" Shock

With crude oil trading around $80/barrel, share prices of exploration and production (E&P) companies have taken a hit. Many of these stocks are down significantly in the last three months.

In certain ways, I don't find this too surprising, given that some of the companies were merely riding the boom in oil prices rather than exhibiting sound fundamental growth. However, the latest slide in crude oil prices seems to have had a blanket effect on E&P stocks -- even on those that look fundamentally sound. Discerning investors should see opportunity here to accumulate shares, as chances of a rebound in these stocks seem high.

Marathon Oil (NYSE: MRO  ) : Marathon's shares have fallen 22% over the last three months. Looking into the company's first-quarter performance, though, there's much to look forward to. With the company's Libyan operations returning to normal, the region produced 35,000 barrels of oil equivalent (Boe/d) to be available for sale. Additionally, Marathon's Bakken production rose a healthy 86% year-over-year to 26,000 Boe/d. At the end of the quarter, its Eagle Ford shale region had 17 operated rigs with four teams working on them. The prospects look excellent for a rebound. Marathon looks cheap enough to be acquired. With a TEV/EBITDA of only 2.9, a bigger company looking for a consolidation could have its eyes set on Marathon.

Continental Resources (NYSE: CLR  ) : This stock has fallen nearly 33% over the last four months following a whopping 97% rally since last August. I'll call this a lucky break to get in. The king of the Bakken shale region has ensured one thing that has always kept it running at full flow: production growth. Crude oil production volumes grew 58% in the first quarter over the previous year. The Bakken and Anadarko Woodford plays contributed to a solid 90% growth in production. For 2012, CEO Harold Hamm is expecting production to go up by 40%. The company aims to triple production in five years.

EOG Resources (NYSE: EOG  ) : This stock also got hammered, falling 22% over the last three months. However, I'm willing to put my money on the company's huge asset base. In the first quarter, EOG increased its crude oil production by 49% year-over-year. The company's North American resource base includes the Bakken and Eagle Ford shale plays. Additionally, the company enjoys a rare advantage in terms of pricing. EOG prices its crude oil against the Light Louisiana Sweet (LLS) benchmark, which trades at a premium to the West Texas Intermediary (WTI). With a TEV/EBITDA of 5.4, the company still looks cheap.

The Foolish bottom line
E&P stocks have taken a hit. But I believe the time is right for some accumulation to take place. However, if you're looking for more ideas, The Motley Fool has created a new special oil report titled "3 Stocks for $100 Oil," which you can download today, absolutely free.

Fool contributor Isac Simon does not own shares of any of the companies mentioned in this article. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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