3 Interesting Energy Stocks to Buy Now

Oil and gas producers are spending billions to take advantage of the vast resources they've been able to unlock thanks to horizontal drilling and hydraulic fracturing. The large list of companies, and therefore the potential investment opportunities, can make it difficult to determine which company is worthy of your investment dollars. I've found three companies, each with a specific catalyst, that make interesting energy stocks to buy right now.

Gulfport Energy (NASDAQ: GPOR  )
While many of its peers are talking about wanting to increase liquids production, Gulfport is already there. Last year oil and natural gas liquids were 93% of production and the company is levered to some of the most prolific liquids plays in the country. The problem is that the play that Gulfport is most levered to, the Utica, has lost its allure with other producers. Several of these peers, including Chesapeake Energy (NYSE: CHK  ) and Devon Energy (NYSE: DVN  ) , have decided to pull back on the Utica after being disappointed by the lack of oil coming out of the play.

Gulfport on the other hand has found the liquids sweet spot and sees it being a catalyst for production growth. The company has drilled some of the best wells in the play and because of that it is now spending nearly $500 million of its $580 million capital budget to further develop its acreage there. Gulfport's success in the Utica, combined with the rest of its high-margin oily assets, makes it a very interesting stock to buy.

SandRidge Energy (NYSE: SD  )
Like Gulfport, you can pretty much sum up SandRidge's future by its focus on one play: the Mississippian Lime. Like the Utica, the Miss hasn't turned out to be as oily as producers like Devon and Chesapeake would have liked, which is why both have recently sold some acreage in that play. However, SandRige, like Gulfport, has found a position in a play that it likes and is investing heavily in that play to grow production.

 

Source: SandRidge Energy

For SandRidge, this means divesting its Permian Basin acreage and refocusing its strategic plan. The refined plan has the company cutting its capex to only focus on its core acres in the play. This is reducing risk while also helping the company focus its capital to grow its oil production as a percentage of its overall production. The improving fundamentals are the story here and SandRidge is a very interesting oil stock to buy right now.

Ultra Petroleum (NYSE: UPL  )
With Ultra the story changes from a focus on oil and liquids to one of natural gas. The story changes even further because Ultra has shied away from the standard industry practice of growth for the sake of growth. Instead, it has decided to invest only within its cash flow.

This discipline has been evidenced by a cut in its capex from $1.56 billion in 2011 to just $415 million this year. Despite the fiscal belt-tightening, Ultra is projecting to still grow its production by 42% while doubling its EBITDA by 2016. That's a lot of growth in a stock you can buy right now at what could be a fraction of its future worth.

Foolish bottom line
In each case you have a company that's focused on doing one thing, and doing it right. To that end all three have a plan in place to deliver very compelling production growth. What's most interesting is that all three are investing where others fear to tread, which is why I think all three make compelling stocks to buy right now.

Of the three companies, I think the future of SandRidge looks the most optimistic. It's trading at a very compelling valuation and is focused on increasing its oil production. If you'd like to learn more about the future of this emerging oil and gas junior and are looking to find out more about its strengths and weaknesses, then check out The Motley Fool's premium research report detailing SandRidge's game plan and what to expect from the company going forward. To get started, simply click here now!


Read/Post Comments (7) | Recommend This Article (15)

Comments from our Foolish Readers

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  • Report this Comment On May 16, 2013, at 3:32 PM, slimback wrote:

    GPOR's Utica acreage claimed best well, the Wagner 1-28 produced 1.5 BCF and 24,000 BO (condensate?) I would classify that as a gas well.

    Another issue from GPOR's earnings call. They claim $99 million EBITDA on 570,000 BOE. That works out to $172.17 per BOE.

    .

  • Report this Comment On May 16, 2013, at 5:07 PM, TMFmd19 wrote:

    @slimback - Yes, the Utica is turning out the be more gassy than the industry had hoped. Not sure what you wanted to know in the first part of your comment.

    However, in part two I think you are missing this: Gulfport's 2013 first quarter results include $61.1 million of mark to market income in connection with Gulfport's 21.4% equity interest in Diamondback Energy, Inc. ("Diamondback"), a NASDAQ Global Select Market listed company. http://www.marketwatch.com/story/gulfport-energy-corporation...

    So, the company recorded this as EBITDA but it didn't count towards its production.

    Hope that helps -

    Matt

  • Report this Comment On May 16, 2013, at 6:40 PM, slimback wrote:

    Matt, That does help explain what happened. It also just reaffirms my belief this entire industry is a house of cards. I see GPOR playing off Windsor Ohio, Windsor Energy and Diamondback. In fact the Windsor Energy website of which Mike Liddell is the CEO redirects to Diamondback. Last month Mike Liddell, Chairman of GPOR stepped down. Do you have any insight on how all these companies tie together? How does Charles Davidson of Wexford Capital fit into the equation?

  • Report this Comment On May 16, 2013, at 8:44 PM, TMFmd19 wrote:

    I'm not too familiar with those relationships other than the wexford capital deals. Let me dig into it a bit and I'll post what I find.

    Matt

  • Report this Comment On May 16, 2013, at 11:42 PM, vireoman wrote:

    I have been building a postion in UPL precisely because it has been focusing on dry gas to the exclusion of everyone else's favored oily stuff. That may make it the red-haired stepchild among producers now, but for the more patient among us, UPL will prove to be very rewarding. Their break-even price on NG is $2.79, and as management pointed out on the earnings call, "we uniquely make a fair amount of money at $4 gas." They went on to say that "we think the commodity will be $5 second half of 2014 and not before." Surprisingly, UPL is still cheap. If you think you are patient enought to wait a whole year to make a lot of money, check out this company.

  • Report this Comment On May 17, 2013, at 6:52 PM, TMFmd19 wrote:

    @slimback - From all appearances there's a pretty close relationship between Wexford Capital and GPOR. If you read through GPOR's annual report you'll see that most of they share an interest in most of their assets with Wexford. That includes Windsor and Diamondback among others. Basically, Wexford controls most of those entities and owns a chunk of GPOR stock. It would appear that they are close partners and the interests are aligned. Certainly an area to watch, but there doesn't appear to be anything amiss.

    You see a lot of this in the energy industry, especially with smaller independents. Hope that helps clear that up for you.

    Matt

  • Report this Comment On May 29, 2013, at 5:40 AM, Fredrickgood wrote:

    OIL and ENERGY stocks are good in this moment. There are two things to consider: 1. as FED Keeps on printing more money to make economy start again, commodities will cost more and more; 2. if economy re-start the demand of energy and oil will grow. I want only to share this simple concept: it is better to wait for the final minimum of this year cycle before buying these stocks. This shoul take place in June 2013. Kind regards, Fredrick - http://www.mystocktobuy.com/

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