Oil prices have surged 16% in a month, leading to speculation there might be a sustained rally for the most widely traded commodity. That, of course, would help shares of U.S. oil-related companies, which have made efforts to become more efficient when energy prices starting tumbling in the summer of 2014.
So we have put together a list of the most highly rated oil-related stocks for investors.
The chart (right) shows that West Texas crude oil at about $50 a barrel, is still down 50% from where it was three years ago. A month ago, it was trading at $43.03:
Signs of better times
OPEC Secretary General Mohammad Barkindo has expressed confidence that Russia will participate in the cartel's effort to cut oil production to boost prices.
Phil Flynn, senior analyst at Price Futures Group, said in his daily Energy Report on Tuesday that "oil is running hot on a weak dollar and U.K. inflation data." He also said recent comments from Federal Reserve Chairwoman Janet Yellen about a strengthening U.S. economy was another "signal" that oil prices could keep rising.
"Even as the Fed embarks on its first interest rate adjustment in a year in December, the proclamation by the Fed chair is that the economy could run oil to our $60 a barrel target," Flynn said.
Shale producers' improvement
On Tuesday, Jefferies analyst Brad Handler said in a report on oil-services and oil-equipment providers that he had become "more optimistic regarding pricing improvement in 2017 — likely in regional pockets at first and then, for hydraulic fracturing, with additional impetus from earning a return on capital to bring equipment back to work."
He said domestic land-based production this year had shown "convincing evidence" that enhancements to productivity were "tangible (and by implication sustainable)."
Handler made significant increases in his estimates for average hydraulic fracturing rig counts for 2017 to 710 from 550 and for 2018 to 984 from 840. He made clear in an email exchange that these changes were based on industry improvements and not recent oil-price increases. He continues to expect an average price for West Texas intermediate crude oil of $57 a barrel in 2017, rising to $71.75 in 2018. His long-term "normalized" price forecast for oil is $80 a barrel.
Analysts' favorite energy stocks
There are 84 energy-sector stocks in the S&P 1500 Composite Index, which is made up of the S&P 500 (.SPX), the S&P 400 Mid Cap Index (.MID), and the S&P 600 Small Cap (.SML).
Here are the 15 energy stocks with "buy" or equivalent ratings from at least 75% of analysts polled by FactSet, sorted by implied upside, based on consensus price targets:
|Company||Ticker||Industry||Share of analysts rating the shares 'buy'||Closing price - Oct. 17||Consensus 12-month price target||Implied upside potential|
|Tetra Technology Inc.||TTI||Oilfield Services/Equipment||93%||$5.85||$8.28||41%|
|Synergy Resources Corp.||SYRG||Oil and Gas Production||87||7.08||9.30||31|
|Exterran Corp.||EXTN||Oilfield Services/Equipment||100||16.43||20.50||25|
|Era Group Inc.||ERA||Oilfield Services/Equipment||100||8.13||10.00||23|
|PDC Energy Inc.||PDCE||Oil and Gas Production||75||63.55||78.00||23|
|Matrix Service Co.||MTRX||Engineering and Construction||83||18.42||22.40||22|
|Marathon Petroleum Corp.||MPC||Oil Regining/Marketing||81||41.85||50.08||20|
|REX American Resources Corp.||REX||Oil and Gas Production||100||81.63||94.50||16|
|Carrizo Oil & Gas Inc.||CRZO||Oil and Gas Production||85||39.81||45.96||15|
|Schlumberger NV||SLB||Oilfield Services/Equipment||80||80.98||92.48||14|
|Anadarko Petroleum Corp.||APC||Oil and Gas Production||76||62.51||70.26||12|
|Pioneer Natural Resources Co.||PXD||Oil and Gas Production||87||184.28||206.07||12|
|Halliburton Co.||HAL||Oilfield Services/Equipment||85||46.32||51.54||11|
|U.S. Silica Holdings Inc.||SLCA||Metals/Minerals||83||47.05||50.80||8|
|Concho Resources Inc.||CXO||Oil and Gas Production||76||136.93||147.65||8|
If you are looking to "play" what looks like an improved oil market, it's important to do more research on your own, with the assistance of your broker or adviser. If you are considering a company, how do you feel about its business plan and its financial outlook? Only then can you make a long-term commitment.