The amazing growth in oil and gas production has the country pondering what had been an unthinkable dream: an energy independent future. The U.S. still has a long way to go to make that dream a reality. While many companies are working overtime to make the dream reality, here are three unique ones that I’m watching.
Core Laboratories (NYSE:CLB)
I'll admit that the first time I heard of Core Laboratories I thought I was going to read about a biotechnology company. Instead, Core helps oil and gas companies by analyzing rock and fluid samples to help them get the resources out of the ground in the most efficient way. Think of the company as the provider of the science behind the oil and gas industry.
The problem is that science doesn’t come cheap and the stock trades at about 30 times earnings. It’s not been getting any cheaper either -- the stock is up more than 25% in the past three months. However, that premium is likely justified given the double-digit earnings growth that analysts project over the next couple of years. The company has a huge runway of growth as the energy industry moves away from the wildcat mentality to a more strategic science and technology driven approach to energy exploration. Core would top my list of companies to buy on a pullback.
FMC Technologies (NYSE:FTI)
Another strategic technological company pick, FMC Technologies, brings technology solutions to the deep, as in deepwater drilling. The company designs, manufactures and services components for the subsea processing of oil and gas from deepwater wells. Given that last year was the best year ever for deepwater discoveries, and that new discoveries are still being made, the future looks bright for FMC.
Like Core, FMC is also up about 25% over the past few months, and its stock is about as expensive at 30 times earnings. However, analysts do expect a bit faster growth from the company given the tremendous activity in deepwater drilling. That undersea activity, however, is attracting more attention, with Schlumberger (NYSE:SLB) recently entering the market through a joint venture. Given the size and global scale of the oil-field services giant I’m a bit apprehensive to add FMC to my portfolio given its recent rise. That’s why I’d prefer to wait for a pullback on this one. The market can’t go straight up forever, right?
This environmental solutions provider offers onshore drillers a one-stop shop for their fracking water needs. It covers the full life cycle of water: the company delivers it to the site, collects it, treats and recycles what it can, and then disposes of the remains. About 70% of the company’s shale business is now devoted to oil and liquid shale plays, meaning that it’s not as affected by the slowdown in natural gas drilling as one might think. The company has made several moves over the past year to diversify its revenue, which is a good thing considering that Chesapeake (NYSE:CHK) previously made up 25% of its revenue. Given Chesapeake's debt problems, that wasn't exactly a comforting thought. The company now boasts 20,000 customers, though its revenue is still fairly concentrated on top exploration and production companies.
I made the new and improved Heckmann -- soon to be Nuverra Environmental Solutions -- my one stock to buy this month. The good news, at least for my stock picking pride, is that the stock is up 20% since I called it out. The bad news is I never had the chance to add it to my portfolio. Unlike the other two companies on the list, Heckmann is still cheap because of how misunderstood it is by the market.
My Foolish take
Right now I’m most interested in Heckmann. Of the three I think it has the best short- and long-term growth prospects. While it’s not as cheap as it was earlier this month, shares are still more than 30% off where it was at the end of 2011 and this is a much stronger and more diversified company that it was back then. That being said, I'm not ready to buy just yet so Heckmann will remain on my watchlist.
Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends FMC Technologies. The Motley Fool owns shares of Heckmann and has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, Short Jan 2014 $15 Puts on Chesapeake Energy, Long Jan 2014 $4 Calls on Heckmann, and Short Jan 2014 $3 Puts on Heckmann. 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.