More than 200 North American oil companies went bankrupt during the recent market downturn. However, that number would have been a whole lot higher if it weren't for the efforts of the management teams that found ways to shore up their balance sheets and keep their struggling companies afloat. With oil prices now stabilizing, those efforts are beginning to pay off. 

However, for five of these producers, the market still hasn't woken up to the reality that these companies are starting to recover. Because of that, risk-tolerant investors could make a killing if Penn West Petroleum (NYSE:PWE), Denbury Resources (NYSE:DNR), Whiting Petroleum (NYSE:WLL), Approach Resources (NASDAQ:AREX), and Chesapeake Energy (NYSE:CHK) keep their upward momentum going.

Mysterious blurred people walking in the fog.

Image source: Getty Images.

The 11th-hour Hail Mary

In March 2016, Penn West Petroleum warned investors that given where oil and gas prices were at the time, it would not be in compliance with its financial covenants at the end of the second quarter, and therefore was at risk of defaulting. However, just before the clock ran out, the company announced the sale of one of its crown-jewel assets for nearly twice what analysts thought it would fetch. As a result of that deal and others that followed, Penn West Petroleum was able not just to stay alive, but it's starting to thrive. That's evident by the fact that the company expects to deliver double-digit organic production growth in 2017 while living within cash flow. Furthermore, Penn West believes it can continue growing at that pace over the next few years even if oil doesn't improve any further, which is a remarkable achievement for a company that just a year ago didn't have the finances to drill any new wells.

Chipping away at debt

Denbury Resources entered the oil market downturn with nearly $3.6 billion of debt, which has acted as a weight on its stock, sending it down more than 90% from the peak at one point. However, because the company hasn't faced a make-or-break deadline like Penn West, it has been able to take a more methodical approach to debt reduction over the past few years. Overall, it has reduced debt 21% since the start of 2015, which has given it more breathing room. Because of that, and the improvement in oil prices, the company has been able to increase investment spending, which will not only halt its output decline but puts Denbury on pace to restart modest production growth later this year.

Oil Pump with red moon in the background.

Image source: Getty Images.

Another debt decline

Whiting Petroleum is another oil stock that at one point had nearly lost all its value, though it still sits some 90% below its all-time high. However, the company has made tremendous progress on shoring up its financial situation over the past year -- including selling non-core assets and completing several debt exchanges by trading legacy debt for convertible notes -- that have combined to reduce debt by 42% over the past year. Because of that and improving oil prices, Whiting Petroleum has the finances to ramp up investment spending this year. The company anticipates that this capital will increase production 23% by year end, which is quite a turnaround considering that output declined 23.4% last year due to underinvestment and asset sales.

Infusing new life into a grave situation

Approach Resources' stock also plunged more than 90% at one point in the oil market downturn. However, the company managed to stay afloat by cutting spending and reducing debt, which put it in the position to receive a lifeline late last year after agreeing to a strategic alliance and deleveraging transaction. That agreement enabled the company to pay off a significant amount of debt, which slashed interest expenses. Because of that, Approach Resources can reallocate that cash flow toward drilling high return wells in the Permian Basin instead of sending it to creditors, which should start creating value for investors.

Drilling rig with the setting sun.

Image source: Getty Images.

Rumors of a demise have been greatly exaggerated

Last spring Chesapeake Energy hired a restructuring law firm to assist it with finding options to improve its balance sheet. That news, however, sparked rumors that the company was preparing to file for bankruptcy, which sent the stock plunging. The company immediately denied those claims and would go on to complete a slew of transactions that reduced total debt while also pushing out maturities. Furthermore, the driller significantly reduced its cost structure and balance sheet complexity by jettisoning assets and reworking midstream contracts. Because of all this, Chesapeake Energy is on pace to grow companywide production by as much as 4% this year, while its oil output should rise 10% versus where it was at the end of last year.

Investor takeaway

Oil companies have been dropping like flies over the past few years. However, some that the market left for dead not only managed to survive but are in the position to start growing again this year. If they can maintain that momentum, these oil stocks could be big winners in the years ahead once the market realizes that they're no longer zombie stocks but viable companies that can thrive in the current environment.

Matt DiLallo owns shares of Denbury Resources. The Motley Fool owns shares of Denbury Resources. The Motley Fool has a disclosure policy.