Oil Well

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Fresh off the news of the first OPEC production cut in eight years, oil stocks have been on a tear over the past few months. While caution is almost certainly warranted, the travails of the past two years do appear to be in the rearview mirror for the oil and gas production industry. In fact, given OPEC's current devotion to increasing the price of a barrel of crude oil, 2017 might just be the year of an all-out turnaround. With this strong possibility in mind, we asked three Motley Fool contributors what stocks they're keen on heading into the new year. So, without further ado, here's why General Electric (NYSE:GE), Vermilion Energy (NYSE:VET), and Noble Energy (NYSE:NBL) are great picks, just in time for the holidays. 

The invisible oil giant 

Travis Hoium (General Electric): GE may not be the first name you think of when you hear "oil stock," but it's a huge player in the field. It has been building a huge energy business for years and recently merged its oil and gas business with Baker Hughes (NYSE:BHI) to form a company with $34 billion in revenue, 70,000 employees, and a presence in over 120 countries. 

Baker Hughes supplies everything from oil-drilling and production equipment to pipeline products and process equipment for refineries. It has a presence up and down the supply chain without being an oil producer itself. And I consider that an advantage in the volatile energy business. 

The pure energy play of these two companies is Baker Hughes, which owns 37.5% of the venture with GE. But by buying shares of GE you get a company in which nearly one-third of revenue will come from the oil and gas business, and there's exposure to more downstream products like jet engines, power plants, and commercial energy products. 

This gives investors a lot of exposure to oil's upside without taking the downside risk that comes with owning an oil explorer or downstream company. And with a 3% dividend yield to fall back on, GE provides a nice value and cash flow for investors who may have been burned by the energy industry in the past. 

This stock has it all

Brian Feroldi (Vermilion Energy): Vermilion Energy might not be a household name, but it is a company that investors should learn to love. Since hitting the public markets 22 years ago, Vermillion has produced a total annualized return of 29%. Better still, it has paid out a stable or rising dividend for 13 years in a row. That's a track record of success that few other energy companies can claim. 

How has Vermilion pulled this off? At the core is the company's investing philosophy -- and shareholders have greatly benefited from its terrific execution. Unlike other energy producers, Vermilion has never been interested in buying proprieties in parts of the world that are prone to instability. Instead, the company invests only in developed counties like Canada, France, Germany, Australia, Ireland, and the U.S. This helps to keep production growing even during times of political upheaval.

A great reason to buy Vermilion today is that its profits are about to soar. The company spent years investing in a major gas field off the coast of Ireland. This investment was a drag on results in the past, but it is now starting to pay off. The project produced its first gas at the end of 2015, and production has been ramping up ever since. When adding in the growth from the company's other fields, Vermilion's profits are poised to rise. Management is currently projecting that funds from operation will grow by 23% next year, followed by another 11% boost in 2018. There's even more upside potential to these numbers if energy prices continue to rebound.

While the company's shares have rebounded sharply along with the rest of the energy sector, I'd argue that they are still attractively priced. In addition, shares offer up a strong 4.5% dividend yield, which is paid out monthly.

In total, Vermilion offers investors stability and a track record of success, growth, and income. What more can you ask for from the oil patch?

A low-cost producer

Sean O'Reilly (Noble Energy): This company has just what investors need in a world where oil prices, despite being recently buoyed by an OPEC production cut, still remain some 50% below the highs of two years ago: low production costs. While Noble Energy's results did dip into the red in fiscal years 2015 and 2016 (as did those of practically every oil and gas producer, unaided by the reserve writedown requirements of the generally accepted accounting principles), the company remains the envy of many a peer. It is likely to increase its production some 6% this year, to approximately 425,000 barrels of oil equivalent per day, all while being cash flow breakeven over the last 12 months, according to data from S&P Global Market Intelligence

Noble Energy has maintained an advantage over many a fellow producer because, while it does have some onshore production that has largely been shuttered in recent years, it remains to a great extent an offshore exploration and production player -- particularly off the U.S. Gulf Coast, in Africa, and in the Mediterranean Sea. While not nearly the size of industry whale ExxonMobil, Noble is a respectable global player. A recent contract to supply Jordan's National Electric Power Company with natural gas from its Mediterranean Leviathan field is proof of this. 

While Noble is expected to have a negative EPS result for FY 2016 and FY 2017, its ability to produce at a low cost while expanding its production makes it a strong consideration for any portfolio. Analysts expect Noble to generate well over $3 in EPS by the end of the decade, and, with shares trading hands at $40, it has a lot to offer investors looking for a great way to ring in the new year. 

Brian Feroldi owns shares of Vermilion Energy. Sean O'Reilly has no position in any stocks mentioned. Travis Hoium has no position in any stocks mentioned. The Motley Fool owns shares of ExxonMobil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.