As the first quarter comes to an end, most investors will be glad to put the last three months behind them, hoping this nightmare market doesn't repeat itself in the second quarter.

Energy stocks had been an exception but recently even they have been caught in the downdraft. The Philadelphia Oil Service Sector Index, or OSX, is up about 10% year-to-date, but it has given back around one-third of its gains in just the last two weeks.

Some more bearish pundits may use the recent weakness in energy stocks to suggest the top has come -- and gone -- for oil and gas stocks. Certainly, there is an argument to be made that seasonal moderation in hydrocarbon demand will lead to a decline in commodity prices. And, as has been argued in these pages before, it will be very difficult for energy stocks to rally with the backdrop of falling commodity prices.

That said, the weakness may also create a buying opportunity for longer-term investors. In fact, there are a handful of reasons to be constructive on energy stocks in the coming weeks.

Positive Earnings on the Way

The next wave of interest in energy stocks is likely to come not as a result of higher commodity prices but of powerful earnings reports from both exploration and production as well as energy services companies. Most of these companies never dreamed of $50-plus oil and $7-plus natural gas when crafting earnings and cash flow estimates for 2005.

In fact, most exploration and production companies used commodity price targets much below current levels -- somewhere in the $35 to $40 range for oil and $4.50-$5.50 range for natural gas -- when developing budgets and guidance for 2005. Granted, there is still plenty of time left this year for prices to move lower, but oil and gas prices would have to post precipitous declines - and hold those depressed levels for the balance of the year - to prove many E&P company price assumptions accurate.

It is clear that most E&P companies should perform well above expectations in the first quarter. The less certain aspect of the numbers game is whether they are ready to project better results for the balance of 2005. But even if the firms leave their numbers for the second through fourth quarters near current levels, the unexpected boost from first-quarter results will cause a bevy of analyst revisions to full-year numbers. And, frankly, with commodity prices showing few signs of cracking, many E&P companies will likely be prepared to move full-year guidance higher.

The same is true among the oil-field service companies. Analysts covering this group also remain very conservative in their first-quarter and full-year estimates, even as companies like Nabors Industries ( NBR - Get Report) -- North America's largest contract driller -- have indicated margins are much stronger than anyone expected into the first quarter and likely to improve throughout the year.

Not only does that bode well for other drillers like Patterson-UTI Energy ( PTEN - Get Report) and its smaller brethren such as Grey Wolf , but it should also bolster nondrilling service companies like Schlumberger ( SLB - Get Report), Weatherford International ( WFT) and BJ Services

Earnings will drive the next stage of bullishness in the energy space. And, even if commodity prices moderate and put pressure on the stocks, it won't take long before investors realize that $40 oil and $5.50 natural gas are an energy bull's dream for equities.

Positive MoJo From New Orleans

A significant amount of this earnings chatter may well begin next week as energy investors gather in the Crescent City for the annual Howard Weil Energy Conference. The HW conference brings scores of exploration and production, service, alternative energy and utility companies to New Orleans for a week of fun, frolic and energetic vibe near the French Quarter.

The largest energy conference of the year always makes news, and this year should be no different. Plus, with companies very cognizant of fair disclosure rules, the news will travel fast because any material facts will be filed in public documents before formal presentations in New Orleans. As a result, look for upbeat outlooks, production updates and even some guidance revisions ahead of the conference, which begins on Monday.

In addition, just like any big industry conference, there will be plenty of chatter. I will look for plenty of bullish talk about longer-term commodity prices, the potential for an acceleration of merger activity among exploration companies, future liquified natural gas (LNG) development as a source of domestic natural gas and the surprising growth in international markets for energy service companies. All of those threads would be positive for energy stocks in the coming week.

That said, there is also likely to be a contrarian view that cites a record turnout for this year's event as a sign that the trade is more crowded than ever. And, while the cycle will remain intact regardless of the rhetoric from HW, the trick will be to determine which investors are just window shopping, which ones are buying and how many showed up to return merchandise for refunds.

International Momentum

The third catalyst -- and one that will take longer to develop -- is the growing impact from international exploration and development. As noted in recent missives regarding drilling companies, countries like Saudi Arabia, Kuwait, Libya, Nigeria, Mexico, Venezuela and others are on the prowl for additional land rigs. In addition, Western oilfield technologies from companies like Schlumberger and Weatherford are in high demand everywhere from North Africa to South America.

The contribution to earnings from international operations is likely to continue to accelerate, especially for larger service companies and drillers with expertise in those diverse regions. The strategy here is to listen carefully to the presentations and conference calls from the larger service companies for indications of increased business away from home. With opportunities from staid nations like Norway to more speculative development in challenging lands like Iraq, the international business may well extend this growth cycle for the energy service names well into 2006.

Less Seasonal Commodity Risk?

The spring months have always been thought to be a time to rebuild inventories, leading to a moderation in commodity prices. While there are no signs that suggest the seasonal pattern will change, there are signals that a more balanced global market could lessen the seasonal impact on commodity prices.

Demand from Asia and anticipation of increased summer demand for crude products in the U.S. and Europe may well lessen the seasonal decline in commodity prices, at least according to ESAI, a Boston energy consulting and strategy firm.

"As China assumes a larger percentage of global demand, the relatively strong Chinese demand in the spring compensates for the fall in demand elsewhere," says Rick Mueller, oil manager at ESAI.

In fact, ESAI believes that with the relatively warm winter this year in Asia depressing kerosene demand, the fall in Asian OECD demand should be less than normal in the second quarter. According to ESAI, global demand fell by more than 2.2 million b/d in the second quarter of 2003, but by only 1.5 million b/d last year. "This year, we are forecasting an even smaller contraction in the spring," says Mueller.

While prices are still likely to show some moderation, ESAI's argument, if true, provides even more support for the $40-plus oil thesis and, as a result, $5.50-plus natural gas.

If those prices are even close to correct, these potential catalysts for energy stocks could help energize your portfolio in the weeks to come.

Christopher S. Edmonds is vice president and director of research at Pritchard Capital Partners, a New Orleans energy investment firm. He is based in Atlanta. At time of publication, neither Edmonds nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to cedmonds@thestreet.com.