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Key Fundamental Statistics for the Oil and Gas Industry in the US

By Edited Nov 13, 2013 0 0

This is a summary and ranking of the key fundamental statistics for the Oil & Gas Exploration & Production Industry for many of the companies in the industry listed on the US Exchanges. If you are interested in data collected for TSX-listed companies, click here. Some companies are on both summaries as they are listed both in Canada and the United States. It is interesting to note that the #1 ranked stock on the Canadian list would have made #1 on this list as well had it not recently delisted from the NYSE. You will notice differences in the metrics of the inter-listed securities as there are differences in Canadian and US reporting standards.

I have excluded companies that are exclusively exploration as their assets will not be fairly reflected in the ranking below as well as Income Trusts as they have a different dynamic to them altogether. All information was taken from TD Waterhouse market research as of November 3.

Updated for Q3 results

The 35 companies included in this ranking will be as follows, accompanied by their symbol on the NYSE, AMEX or NASDAQ Exchanges:

Anadarko Petroleum Corp - NYSE:APC
Apache Corporation - NYSE:APA
ATP Oil & Gas Corporation - NASDAQ:ATPG
Advantage Oil and Gas Ltd - NYSE:AAV
Berry Petroleum Co - NYSE:BRY
Brigham Exploration Co - NASDAQ:BEXP
Cabot Oil & Gas Corp - NYSE:COG
Canadian Natural Resources Ltd - NYSE:CNQ
Chesapeake Energy Corp - NYSE:CHK
Concho Resources Inc - NYSE:CXO
Continental Resources Incorporated - NYSE:CLR
Denbury Resources Inc - NYSE:DNR
Devon Energy Corp DE - NYSE:DVN
EnCana Corp - NYSE:ECA
EXCO Resources Inc - NYSE:XCO
Forest Oil Corp - NYSE:FST
Gran Tierra Energy Inc - AMEX:GTE
Ivanhoe Energy Inc - NASDAQ:IVAN
Linn Energy LLC - NASDAQ:LINE
Mariner Energy Inc - NYSE:ME
McMoRan Exploration Co - NYSE:MMR
Newfield Exploration Co - NYSE:NFX
Nexen Incorporated - NYSE:NXY
Noble Energy Inc - NYSE:NBL
Pioneer Natural Resources Co - NYSE:PXD
Plains Exploration & Production Co - NYSE:PXP
Quicksilver Resources Inc - NYSE:KWK
Range Resources Corp - NYSE:RRC
Rosetta Resources Inc - NASDAQ:ROSE
SM Energy Co - NYSE:SM
Stone Energy Corporation - NYSE:SGY
Swift Energy Co - NYSE:SFY
Talisman Energy Inc - NYSE:TLM
Ultra Petroleum Corp - NYSE:UPL
Whiting Petroleum Corp - NYSE:WLL

You will notice that the majority of these companies outrank the industry for each metric because I have chosen these stocks as they are the strongest performers. The ones at the top of each list would be the "best of the best" in terms of being undervalued.

Price/Earnings

The Price to Earnings metric measures a company's stock price to its earnings per share. A company with a lower P/E is considered to be more undervalued than one with a higher P/E. While price to earnings metrics generally need to be around 15 or less for a company to be considered a bargain, there are several factors leading to the industry's Price to Earnings of 24.8. The metric is allowed to be high for companies that are seen as being in "growth" industries, meaning their earnings are expected to grow exponentially beyond their current levels. Given that many of these companies have untapped exploration assets and that the price of oil is expected to increase in the future, they are all expected to grow and therefore leniency is given to them with respect to their P/E. ATPG, AAV, IVAN and MMR do not have positive earnings and are excluded from this ranking:

XCO.................3.1
ECA.................9.9
DVN...............12.7
NFX...............12.8
APA...............13.2
FST................15.1
CNQ...............15.3
BRY...............15.9
PXD...............17.6
UPL...............18.5
NXY..............18.7
SM.................18.9
SGY...............19.1
KWK.............20.3
PXP...............20.4
NBL...............21.3
DNR..............21.7
CHK..............22.6
ME................24.2
SFY...............24.6
Industry....24.8
CXO..............27.8
APC ..............28.5
WLL..............28.7
CLR...............31.6
COG..............34.9
GTE..............35.2
TLM..............40.0
ROSE.............45.4
BEXP.............69.6
LINE.............82.5
RRC.............101.8

Price/Sales

The Price to Sales metric measures a company's stock price in terms of total sales, with the lower number representing a more undervalued stock price. Again, some leniency is given to the industry as the industry metric of 6.5x is far above other industries which have P/S metrics of 1 to 2. Rankings are:

SGY...............1.1
CHK...............1.6
NXY..............1.8
ATPG............2.1
ECA...............2.1
SM.................2.6
APC...............2.7
BRY...............2.7
PXP...............2.7
KWK.............2.8
ME................2.8
SFY...............2.8
TLM..............2.8
DVN..............2.9
AAV..............3.2
PXD..............3.2
CNQ..............3.3
MMR............3.3
APA..............3.5
COG..............3.6
FST..............4.1
WLL.............4.1
ROSE...........4.4
NFX.............4.5
DNR............4.7
NBL.............4.7
GTE.............5.4
RRC.............5.8
LINE............6.2
Industry...6.5
UPL.............7.4
XCO.............8.4
CXO.............8.5
CLR..............9.0
BEXP..........20.8
IVAN..........37.4

Price/Book

The Price to Book metric measures a company's price in terms of its total company equity. This metric is relatively more important in the oil and gas industry for the simple fact that the majority of a company's value is easily measured by the amount of oil and gas they own multiplied by current oil and gas prices. While a tech company, for instance, would receive little to no value in its goodwill and human capital in the event of liquidation, an oil and gas company liquidating its assets has a clear and measurable worth to them. While important, the Price/Book metric can get tricky. Significant variances in the market value of the assets a company holds and the book value - which is the at cost value of the asset on the balance sheet - can exist. If an asset's market value is worth less than its book value, GAAP requires that the company writes the asset down on the balance sheet but if an asset is worth much more than the value on the balance sheet, nothing is changed. Combine this with the depreciation of the asset as the resources are depleted and most oil and gas companies should have a market value well over their book value. So a book value over 1 does not necessarily mean a company is overvalued, but a book value of less than 1 could potentially point out undervalued stocks as the enterprise or market value of the company could be much more than its book value. The industry metric of 14.1 reflects this as the market believes that the assets each company owns are worth way more than what is reflected on the balance sheet. You'll notice that all 35 companies rank well above the industry average for P/B. This gives credence to the thought that all companies on this list make worthwhile investment choices. Rankings are:

AAV................0.9
CHK.................1.2
ECA.................1.2
PXP.................1.2
NXY................1.3
APC.................1.5
DNR................1.6
TLM................1.6
COG................1.7
DVN...............1.7
SFY.................1.7
BRY................1.8
SGY................1.8
APA................1.9
CNQ................1.9
LINE...............1.9
ATPG..............2.0
PXD................2.0
NBL................2.1
GTE................2.2
SM..................2.2
ROSE..............2.3
NFX................2.4
RRC................2.4
WLL................2.4
FST.................2.7
IVAN..............2.7
ME..................2.7
XCO................2.7
KWK..............3.2
CXO...............3.6
BEXP.............4.3
CLR................6.8
UPL...............6.9
MMR.............9.2
Industry...14.1

Price/Cash Flow

The Price to Cash Flow metric measures a company's cash flow in terms of its stock price. I view this metric as well as the Price to Book metric as the two most important ones in finding deeply undervalued companies as the latter measures just how undervalued a company is while the former measures its ability to pay off any debt the company many have. If a company's stock price is well below its book value per share and has negative earnings, that book value per share declines over time but its already so high relative to the stock price that it doesn't matter so much unless the stock price rises to an unsustainable level. However, if a company has low or negative cash flow, it may be forced to liquidate its assets at low prices and shareholders may not have enough time to see the stock recover in price and realize the value of their company. IVAN does not currently have positive cash flow so it is excluded from the rankings. When comparing P/CF of the inter-listed companies, you'll notice it differs significantly between the American and Canadian symbols. Rankings are:

SGY..............2.6
XCO..............2.7
ECA..............3.8
NXY.............4.6
ME...............5.1
SFY..............5.8
PXP..............5.9
SM...............5.9
APC.............6.5
NFX.............6.5
TLM.............6.6
CHK.............6.6
DVN.............6.6
BRY.............6.7
CNQ.............7.0
FST..............7.0
AAV.............7.1
APA.............7.1
PXD.............7.4
KWK............7.6
COG.............8.6
Industry...9.1
NBL.............9.1
GTE.............9.3
ROSE...........9.9
WLL...........10.1
DNR...........11.2
UPL............11.6
RRC............13.9
CXO............14.6
ATPG..........14.9
CLR.............17.3
MMR...........17.9
LINE............18.1
BEXP...........33.7

Profit Margin

The Profit Margin figure is important because you can estimate how much oil or gas must increase or decrease in price for a company to breakeven in its operations, assuming all other things remain equal like General and Administrative Expenses and economies of scale. The majority of the companies have a positive profit margin so they are able to remain profitable even if there is a pullback in oil and gas prices. While a profit margin is good, a company with a large profit margin will have less positive exposure to upward swings in oil and gas prices. A company with a thin or negative profit margin will see great improvement in their earnings if oil and gas increase which would likely be accompanied by a better than average appreciation in stock price. Rankings are:

XCO............278.31%
FST.............43.81%
UPL.............40.34%
NFX.............34.71%
CXO.............30.09%
CLR..............28.55%
BEXP...........27.62%
APA.............24.62%
DVN.............24.27%
NBL.............22.71%
CNQ.............21.81%
ECA..............20.98%
PXD.............20.10%
DNR.............19.63%
WLL.............18.65%
BRY.............16.63%
KWK............16.14%
GTE.............15.86%
Industry...15.17%
SM...............14.09%
PXP.............13.40%
SFY..............11.43%
ME...............11.34%
COG.............10.53%
APC.............10.01%
NXY..............9.53%
ROSE.............9.47%
CHK..............7.75%
LINE.............7.65%
TLM..............7.10 %
RRC...............5.89%
SGY...............5.82%
MMR..........-19.48%
AAV............-22.93%
ATPG..........-31.76%
IVAN.........-112.37%

Overall Ranking

My final stat will be a personal overall ranking based on my calculations and a 15% weighting each for P/E and P/S, 25% weighting each for P/B and P/CF, and a 20% weighting on Gross Margin. If a company does not have a P/E or P/CF, it receives a score of 0 for that category. These numbers are neither a buy nor a sell recommendation but rather a weighted average ranking of the statistics above, reflecting what I believe are the most undervalued companies. You must do your own research into any company listed here that you are interested in as there could be factors outside of these numbers that explain why a stock is priced the way it is. These can include non-recurring earnings, legal affairs, liquidity issues, and amount, type and cost to produce of the resources that they have, among others. Rankings are:

SGY............210
XCO............181
ECA............141
NXY...........140
PXP............120
SFY............119
CHK...........116
SM.............115
TLM..........115
ME............107
PXD............99
KWK...........98
DVN............96
NFX............94
WLL............92
FST.............88
BRY.............87
APC.............86
AAV.............86
CNQ.............84
NBL.............84
ROSE...........84
APA.............77
UPL.............77
COG.............74
GTE.............72
RRC.............71
DNR.............70
ATPG...........62
LINE............60
MMR............57
CXO.............49
Industry...44
CLR.............43
BEXP...........28
IVAN.............7

Stone Energy ranks #1 on this list as it came in first place in both Price to Sales and Price to Cash Flow while also having respectable P/E, P/B and margin. Ivanhoe Energy ends the list as it is still in the midst of bringing several of its wells into production and currently has negative earnings and cash flow. It is always a good idea to ensure a company you plan to invest in is well-funded with enough cash on the balance sheet, but it is a particularly good idea for a company in Ivanhoe's position. They have $114M in cash on their balance sheet as of June 30, 2010.

There are other great resources for oil company research available on the web.

Refer to my other investment articles if you are interested in learning about:

Junior Gold Explorers

Biotech Stocks and Beaten Down Biotech Stocks

Natural Gas

Canadian Bank Stocks

Penny Stocks


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