We may have hit the turning point for the oil industry. Maybe. Some oil and gas stocks seem to be on the upswing after years of declines. Beleaguered giant BP (NYSE:BP), for example, is up 7.9% so far this year. 

Sadly, however, that hasn't translated into outperformance across the sector. Some oil and gas exploration and production stocks like Hess (NYSE:HES) and Apache Corporation (NASDAQ:APA) are still trading close to multiyear lows. Hess, in particular, is trading near levels the stock hasn't seen since 2005. Let's look a little closer to see if the stock is a buy at these prices.

Bills and a stack of pennies sit on a desk with a chart, tiny oil drums, and a pool of black liquid.

Investors who have bought Hess over the last dozen years haven't had much luck. Could that be about to change? Image source: Getty Images.

The recent trend

Hess stock dipped below $35 per share in January 2016, an 11-year low for the oil driller. It was a bad month all around for oil stocks: Apache's stock, too, hit its lowest point in a decade that month, and BP's shares dropped down to levels it hadn't seen since the Deepwater Horizon disaster.

Oil prices rebounded, and so did the stocks of most oil companies. In August 2017, though, Hess shares were back below $38 per share, perilously close to those January 2016 levels. Once again, however, Hess wasn't alone. Hess stock and those of six of its peer oil drillers, including Apache, were down 30% or more for the year. 

But blame oil prices, not Hess. In late August, WTI crude dropped below $46 per barrel, while Brent crude slipped perilously close to $50 per barrel. According to a recent investor presentation, Hess isn't yet cash flow positive at those prices, although it claims it will be by 2020. 

Hess has a few tricks up its sleeve, though, that may give it an edge over its peers in the coming months.

Bakken to the future

Hess has operations all over the world, but its largest play is in the Bakken shale of North Dakota. Its Bakken plays represent 34% of the company's production and 31% of its proven reserves. The company boasts that its Bakken acreage position is "industry-leading." That is why it may seem odd that, at the beginning of the year, Hess only had two rigs in the Bakken.

Tthe company has decided to change all that, adding a third Bakken rig in March and a fourth in April. Those four rigs, Hess estimates, will lead to annualized production growth of approximately 10%, increasing from about 100,000 barrel of oil equivalents per day to approximately 175,000 BOE/d.

It sees growth potential outside the Bakken as well. Hess projects production growth of 35,000 BOE/d from its offshore rigs in the Gulf of Mexico and the Malay Basin in southeast Asia. It's partnering with ExxonMobil on a massive project with huge potential off the coast of Guyana. If all of this projected growth comes to fruition, Hess could be poised for incredible outperformance.

Nothing is certain

Of course, it's possible that these projections are too rosy. Oil exploration is fraught with risks, and sometimes production growth that seems to be a sure thing just doesn't materialize. Luckily for investors, Hess's fundamentals seem well positioned to weather such a disappointment.

The company has a top-notch balance sheet, particularly given the sector in which it operates. Oil drillers are notorious for carrying heavy debt loads -- BP has nearly $40 billion in net long-term debt on its balance sheet, but Hess has managed to keep its load manageable. Hess currently sports a debt-to-capital ratio of 32.8%, among the lowest in its peer group. Apache's is far higher, at 55.1%, and even big BP's is 39.4%.

Hess is also sitting on $2.5 billion in cash, with only about $600 million of its debt maturing by 2019. Its product mix is also heavily tilted (71%) toward higher-margin liquids, with oil making up 58% of overall production. It even pays a dividend of about 2.2% -- similar to best-in-class Apache's. Those are great numbers and ones investors should pay attention to.

Investor takeaway

Looking at the big picture, Hess seems likely to outperform. It has a solid balance sheet, a good product mix, and excellent opportunities for growth. What's holding it back is what's also holding Apache back: the uncertain energy market.

If oil prices drop below $50 per barrel for a prolonged amount of time, companies across the entire industry is going to be hurting, no matter what their balance sheets look like or how high their dividend yields are. And if prices drop low enough that they can't make money on the oil they're pumping, all the production growth in the world isn't going to solve the problem.

But if you think, as I do, that oil prices have probably largely stabilized and may even rise modestly, Hess should be one of the top oil companies you consider buying.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.