While the stock market has cooled off considerably over the past few months, it's not exactly cheap these days. The S&P 500 trades at about 20 times earnings, a little bit above its historical average of around 16 times. It also trades at about 20 times free cash flow, giving it a free cash flow yield of roughly 5%. Meanwhile, the Nasdaq Composite is even more expensive despite its nosedive, trading at about a 4% free cash flow yield. 

However, there are a lot of bargains these days. Some of the biggest are surprisingly in the oil patch. Even with surging oil prices, many oil stocks trade at bottom-of-the-barrel valuations. Here are two absurdly cheap oil companies that value-conscious investors won't want to miss.

Using its gusher to create more value

Although oil prices have bounced around quite a bit, they've been close to $90 a barrel in recent weeks. Devon Energy (DVN -0.89%) can produce over $6 billion of annual free cash flow at that level. Given its current market cap -- which has rocketed over 60% this year as the stock has surged -- Devon trades at a more than 15% free cash flow yield. That's over four times higher than the broader market indexes.

Devon is using a large portion of its cash flow gusher to pay dividends. The company pays a fixed base quarterly dividend and a variable dividend of up to 50% of its free cash flow each quarter. It most recently paid out $1.55 per share, 22% above the prior quarter's payout. That dividend has an implied annualized yield of 8.5% at the recent stock price. 

The company has allocated the other half of its free cash flow to repurchase shares, strengthen its top-notch balance sheet, and acquire more cash-gushing oil properties. The oil company has a $2 billion repurchase program underway, enough to retire 6% of its outstanding shares, given the stock's low valuation. 

Meanwhile, Devon recently bought some oil assets at even more ridiculously low prices. It acquired Validus Energy at an implied free cash flow yield of 30% and RimRock Oil and Gas' assets in the Williston Basin valued at a more than 25% free cash flow yield. Those value-enhancing deals will give Devon more fuel to pay dividends and buy back its cheap stock. 

Increasing its ability to be opportunistic

Diamondback Energy (FANG 0.43%) estimates it can produce more than $4.3 billion of free cash flow this year at $90 oil. Given its recent stock price -- which is up 30% this year -- it trades at a more than 15% free cash flow yield.

The company has also been returning its windfall to shareholders this year. Diamondback recently increased its capital return program from 50% of its excess cash to 75%. It's sending that money back to shareholders via a rapidly rising base dividend payment, variable dividends, and share repurchase program. The combined base plus variable dividend has been $3.05 per share in each of the past two quarters, implying an 8.7% annualized dividend yield. 

Meanwhile, Diamondback recently doubled its share repurchase authorization to $4 billion. That will give it more flexibility to opportunistically repurchase its cheap shares. The company bought back $303 million of its stock at an average price of $127.61 per share in the second quarter. It took advantage of a decline in its stock to buy back another $200 million of shares at an average price of $113.70 per share early in the third quarter. While the stock has rebounded from that price, it's still really cheap. 

Still extremely cheap despite surging

Surging oil prices have Devon Energy and Diamondback Energy generating enormous amounts of free cash flow. While their stock prices have also rallied, shares are still incredibly cheap, given the cash they're producing. That's enabling them to pay monster dividends and buy back meaningful amounts of their outstanding stock. Because of that, they're attractive options for value-conscious investors seeking a sizable passive income stream since their low valuations allow them to offer big-time dividend yields.