Drill Baby Drill: 8 Cash Rich Energy Stocks

We decided to take a closer look at 8 energy stocks to see who's in the energy business for the long haul. 

The US is on pace to overtake Russia as the world's largest energy producer this year, if it hasn't alreade done so. It's an important development that reflects the strength of America's energy boom. However, as we've reported in the past, most of this growth is not coming from the big name firms - the so-called "supermajor" oil companies that are household names.  

Instead much is coming from smaller firms using improved technology to access vast deposits of natural gas through the use of hydraulic fracturing - also known as "fracking." And while the technology has been a boon of sorts to US energy productions, it has not spread as easily throughout the rest of the world. 

Environmental activists have stalled efforts to bring the practice to Britain, and Russia's energy giant Gazprom, along with many of the major oil-producing countries in the Middle East, still deal primarily in crude.

However, while the proliferation of hydraulic fracturing has considerably reduced America's energy exports - by 32% for natural gas and 18% for crude oil - it also comes with some problems. For one, there is wide-spread opposition in some areas among environmentalists and community activists alike.

They argue that natural gas is a terrible polluter because of supposedly higher methane emissions, and that it will continue American dependence on fossil fuels. So far, a dearth of hard data on the matter has made resolving once and for all the dangers of "fracking" all that more complicated. 

America's drilling rivals have pointed to the spike in natural gas as simply a bubble. And while they may just be smarting from diminished revenues, as the world's largest energy consumer starts relying more and more on itself, there are some problems with natural gas:

It's very expensive to extract. Smaller companies in particular often borrow a lot of money to keep up. Huge amounts of capital investment are usually necessary.  Firms must develop the off-shore wells or shale mines needed to access our own reserves.

Investing ideas

To see which firms are succeeding on this front, we decided to look for encouraging accounts receivable trends, a measure which helps to gauge whether a company's quality of sales, not just the quantity, is increasing over time.

Specifically, we screened for names with strong sales trends relative to accounts receivable, and for increases in revenue that are outpacing increases in accounts receivable year over year. These trends are positive because accounts receivable is that not yet received, and there is no guarantee it will be received in full, so the smaller the portion of revenue and current assets, the better.

Companies with encouraging accounts receivable trends have a relatively clearer picture of their finances going into the future. This naturally makes it easier for them to invest and pay down debt, as well as serving as an indication that they are nurturing good relationships with reliable clients.

For heavily leveraged firms with expensive projects on the table that aren't generating much revenue yet - this is an important indicator of continuity. 

We were left with 8 companies on our list. 

Click on the interactive chart below to see data over time. 

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Do you see investing opportunities in oil and gas drilling and exploration? Use the interactive list below to begin your own analysis.

 

1.Advantage Oil & Gas Ltd. (AAV, Earnings, Analysts, Financials):Engages in the acquisition, exploration, development, and production of oil and gas in the provinces of Alberta and Saskatchewan, Canada. Market cap at $656.69M, most recent closing price at $3.90.

Revenue grew by 39.86% during the most recent quarter ($69.23M vs. $49.5M y/y). Accounts receivable grew by 2.06% during the same time period ($30.15M vs. $29.54M y/y).

Receivables, as a percentage of current assets, decreased from 77.45% to 76.72% during the most recent quarter (comparing 3 months ending 2013-06-30 to 3 months ending 2012-06-30).

 

2.Diamond Offshore Drilling Inc. (DO, Earnings, Analysts, Financials):Operates as an offshore oil and gas drilling contractor worldwide. Market cap at $8.68B, most recent closing price at $62.43.

Revenue grew by 2.69% during the most recent quarter ($758.02M vs. $738.19M y/y). Accounts receivable grew by -11.97% during the same time period ($468.61M vs. $532.3M y/y).

Receivables, as a percentage of current assets, decreased from 26.03% to 25.16% during the most recent quarter (comparing 3 months ending 2013-06-30 to 3 months ending 2012-06-30).

 

 

3.Ensco plc (ESV, Earnings, Analysts, Financials):Provides offshore contract drilling services to the oil and gas industry. Market cap at $12.63B, most recent closing price at $54.71.

Revenue grew by 16.53% during the most recent quarter ($1,248.1M vs. $1,071.1M y/y). Accounts receivable grew by 5.35% during the same time period ($902.1M vs. $856.3M y/y).

Receivables, as a percentage of current assets, decreased from 58.63% to 50.58% during the most recent quarter (comparing 3 months ending 2013-06-30 to 3 months ending 2012-06-30).

 

4.Magnum Hunter Resources Corp. (MHR, Earnings, Analysts, Financials):Engages in the acquisition, development, and production of oil and natural gas primarily in West Virginia, North Dakota, Texas, and Louisiana. Market cap at $1.12B, most recent closing price at $6.58.

Revenue grew by 97.93% during the most recent quarter ($84.04M vs. $42.46M y/y). Accounts receivable grew by 40.5% during the same time period ($72.09M vs. $51.31M y/y).

Receivables, as a percentage of current assets, decreased from 50.48% to 41.45% during the most recent quarter (comparing 3 months ending 2013-06-30 to 3 months ending 2012-06-30).

 

5.Petroleo Brasileiro (PBR, Earnings, Analysts, Financials):Engages in oil and natural gas exploration and production, refining, trade, and transportation businesses. Market cap at $102.53B, most recent closing price at $15.72.

Revenue grew by 2.63% during the most recent quarter ($35,569M vs. $34,659M y/y). Accounts receivable grew by -6.53% during the same time period ($16,073M vs. $17,196M y/y).

Receivables, as a percentage of current assets, decreased from 29.88% to 24.61% during the most recent quarter (comparing 3 months ending 2013-06-30 to 3 months ending 2012-06-30).

 

6.Rex Energy Corporation (REXX, Earnings, Analysts, Financials):Operates as an independent oil and gas company in the Appalachian, Illinois, and Denver-Julesburg Basins. Market cap at $1.13B, most recent closing price at $21.50.

Revenue grew by 82.95% during the most recent quarter ($55.36M vs. $30.26M y/y). Accounts receivable grew by 77.92% during the same time period ($29.41M vs. $16.53M y/y).

Receivables, as a percentage of current assets, decreased from 29.45% to 27.16% during the most recent quarter (comparing 3 months ending 2013-06-30 to 3 months ending 2012-06-30).

 

 

7.SeaDrill Limited (SDRL, Earnings, Analysts, Financials):Provides offshore drilling services to the oil and gas industries worldwide. Market cap at $21.71B, most recent closing price at $46.29.

Revenue grew by 13.01% during the most recent quarter ($1,268M vs. $1,122M y/y). Accounts receivable grew by 1.42% during the same time period ($1,071M vs. $1,056M y/y).

Receivables, as a percentage of current assets, decreased from 53.55% to 35.96% during the most recent quarter (comparing 3 months ending 2013-06-30 to 3 months ending 2012-06-30).

 

8.Vantage Drilling Company (VTG, Earnings, Analysts, Financials):Provides offshore contract drilling services to large multinational oil and natural gas companies, government owned oil and natural gas companies, and independent oil and natural gas producers in the United States and internationally. Market cap at $543.71M, most recent closing price at $1.80.

Revenue grew by 62.33% during the most recent quarter ($170.64M vs. $105.12M y/y). Accounts receivable grew by 31.71% during the same time period ($107.88M vs. $81.91M y/y).

Receivables, as a percentage of current assets, decreased from 32.19% to 17.5% during the most recent quarter (comparing 3 months ending 2013-06-30 to 3 months ending 2012-06-30).

 

 

(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research, accounting data sourced from Google Finance. All other data sourced from Finviz.)

 

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Analyze These Ideas: Getting Started

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Dig Deeper: Access Company Snapshots, Charts, Filings

Advantage Oil & Gas Ltd.(AAV, Chart, Download SEC Filings) Diamond Offshore Drilling Inc.(DO, Chart, Download SEC Filings) Ensco plc(ESV, Chart, Download SEC Filings) Magnum Hunter Resources Corp.(MHR, Chart, Download SEC Filings) Petroleo Brasileiro(PBR, Chart, Download SEC Filings) Rex Energy Corporation(REXX, Chart, Download SEC Filings) SeaDrill Limited(SDRL, Chart, Download SEC Filings) Vantage Drilling Company(VTG, Chart, Download SEC Filings)

 

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