My time in San Francisco at The Oil and Services Conference revealed a lot about what’s going on in the hallways and boardrooms of the country’s oil companies.
On Tuesday, I explained the delineation between the companies that will survive the current crisis and emerge in much stronger shape a couple of years from now… and those that will come out of the crash bruised and limping.
Obviously, Wall Street Daily readers want to side with the former.
So, as promised, here are the two best oil companies for investors looking for legitimate plays that aren’t threatened by current oil prices. These firms are poised for solid growth in the months and years ahead.
Placing Smart Bets
If oil prices recover this year, all boats will rise with the tide. The problem is, that’s an iffy bet at this point.
Sure, you can speculate with highly leveraged companies like Halcon Resources Corporation (NYSE:HK) or Energy XXI (Bermuda) Limited (NASDAQ:EXXI). These firms will soar if prices recover to the $70 to $80 range by the end of this year.
But if we see a protracted slump, that’s not where you want your real investment dollars working for you.
Here are two companies that will not only survive, but prosper.If you need any proof of this, look at where companies like JPMorgan Chase (NYSE:JPM) & Co (NYSE:JPM), Apple Inc (NASDAQ:AAPL), and Home Depot (NYSE:HD) were trading during the crash of 2008 and 2009.
Must-Have No. 1: Synergy Resources Corporation (AMEX:SYRG). This is a small-cap play that dominates in the Wattenberg region of Colorado, where the company has prolific oil-producing properties that are profitable below $60 per barrel. Synergy is also in the process of acquiring more land in an area where land is seldom up for sale, and it’s acquiring more assets and operations from smaller, more-leveraged providers. Shares are down about 25% from their highs versus 50% to 70% for the more-leveraged producers.
Must-Have No. 2: EOG Resources Inc (NYSE:EOG). This is a large-cap producer that’s dominant in many of the big shale plays. It has a lower cost structure, less leverage than most of its peers, and is considered the premier play in the sector. What I like most about EOG Resources is what the company said in its most recent earnings announcement. That is, it’s planning to curtail production and NOT increase it during the current crisis. The company doesn’t want to sell its assets (oil and gas) at current levels, which are too cheap. Instead, the company is holding its oil in the ground and waiting for better times and prices (because it has that luxury).
If you’re looking to build your future energy portfolio or make some lateral adjustments, these two companies are a great place to start. And the current prices are attractive enough to begin wading into positions.
And the chase continues,