10 Energy Stocks With Upside

NEW YORK (TheStreet) -- First Solar (FSLR), BP (BP), Sinopec (SNP), Petroleo Brasileiro (PBR/A), Total (TOT), Eni SpA (E), InterOil (IOC), TransAtlantic Petroleum (TAT), Transocean (RIG) and STR Holdings (STRI) are energy stocks that could deliver up to 168% according to Bloomberg consensus estimates.

Slowing U.S. expansion, Japanese earthquake and monetary tightening in emerging economies like China and India have been able to put brakes on the commodity prices in the recent past. However, analysts are bullish on crude oil prices from here-on and have raised price forecast for the remainder of the current year. Goldman expects Brent crude to breakout out above $130 a barrel, while Morgan Stanley has raised its 2011 Brent target to $120 a barrel. At close Monday (July 18, 2011), Brent crude settled at $116.1 per barrel.

Below are 10 energy stocks that have 22%-168% upside potential, based on analysts' average 12-month price targets. These stocks are expected to deliver an average 50% return over the next one year.

10. Sinopec ( SNP) is a China-based integrated oil & gas and chemical company.

With China switching to a new refined oil pricing mechanism in 2008, Sinopec's refining business has turned around after years of loss making. However, when crude oil prices spike, the giant refiner suffers as it buys more than 70% of its crude supply from the global markets. Overall, Sinopec owns eight of the top ten refineries in the country and refining capacity that is ranked second globally.

Net income jumped 25% during the first quarter of 2011, while revenue improved 34%. First quarter output was 3.6 billion cubic meters of natural gas and 11 million tonnes of crude oil, representing a fall of 30% and 6% during the same period last year, respectively.

Analysts polled by Bloomberg recommend 75% buy rating on the stock. Upstream asset injections from parent company and changes to refined product pricing mechanism are probable triggers for the stock on the upside. The stock has appreciated 16% during the current year and consensus estimate expects a 22% increase over the next one year. The stock is trading at 6.4 times its estimated 2011 earnings.

9. First Solar ( FSLR) manufactures solar modules with an advanced semiconductor technology, and is a provider of comprehensive photovoltaic system solutions.

Net income reported in the first quarter of 2011 was $115 million vs. $172 million in the same quarter last year. Higher selling costs and research & development expenses pressured profitability. For 2011 first quarter, total revenue came in flat year-over-year at $567 million.

Summarizing the business performance, Rob Gillette, CEO of First Solar, said, "Despite European market uncertainties, First Solar has good visibility into our demand for 2011." He added, "We continue to execute our cost roadmaps, invest in new module capacity, build our project pipeline, and develop promising new markets around the world."

The company has updated its 2011 guidance with operating income pegged at $900 million to $970 million, while 2011 EPS is estimated between $9.25 and $9.7. Net sales are estimated between $3.7 billion and $3.8 billion for the full year.

The stock has analysts' buy ratings of 51% and is expected to deliver 23% return over the next one year. The stock is trading at 13.3 times its estimated 2011 earnings.

8. BP ( BP) is a global integrated oil and gas company.

Net income during the first quarter of 2011 rose 17% year-over-year to $7.1 billion. Net sales stood at $85.3 billion, increasing 17% from the same period last year.

Impacted by Gulf of Mexico oil spill, net cash from operating activities stood at $2.4 billion during 2011 first quarter, compared to $7.7 billion in the prior-year period. Net cash outflow stood at $2.8 billion, consequent to the Gulf of Mexico oil spill and increased working capital expenses.

Capital expenditure for the first quarter was $4 billion. The company announced a strategic alliance with Rosneft Oil Company to explore and develop three license blocks in the Russian Arctic region.

As per analysts consensus estimate, average gains are pegged at around 27% over the next one year. The stock is trading at 6.2 times its estimated 2011 earnings.

7. Total ( TOT) is an integrated oil and gas company with operations in more than 130 countries. Overall, Total has interests in 24 refineries located in Europe, the U.S., as well as retail network of over 16,000 stations worldwide.

The company's revenue and net income increased 21% and 49%, respectively for the first quarter of 2011 compared to same quarter in 2010.

Total's return ratios are better than its peers. Total's return on average capital employed and return on average equity for 2010, stood at 16.8% and 20%, respectively.

The company is actively pursuing deals in the upstream, entered into partnerships in Russia and Uganda during the quarter. The company offered to acquire SunPower, a U.S. based Solar Company.

The stock made modest gains of 3% during the current year, and analysts are positive on the stock. They expect the stock to deliver 30% gains in the next one year. As per Bloomberg estimates, the stock has analyst buy ratings of 67% and is trading at 6.8 times its estimated 2011 earnings.

6. Transocean ( RIG) is the world's largest offshore drilling contractor and provider of drilling management services. Its fleet consists of 137 mobile offshore drilling units apart from one ultra-deepwater drillship and three high-specification jack-ups under construction.

Net income attributable to controlling interest was $310 million in the first quarter of 2011 and it got weighed down by legal costs and increased insurance premiums. In the same period in 2010, the net income attributable to controlling interest was $677 million.

Revenue for March quarter of 2011 were $2.14 billion, versus $2.13 billion during the first quarter of 2010 as contract drilling revenue was impacted by lower utilization. Positively, future revenue could get a boost from two new-build rigs commencing operations in the March quarter and another drilling management services activity could be an additional revenue source.

Analysts have buy ratings of 60% and expect the stock to deliver 35% over the next one year. The stock is trading at 15.6 times its estimated 2012 earnings.

5. Eni SpA ( E) is an Italy-based energy major with activities ranging from oil and gas exploration and production, gas marketing, management of gas infrastructure, power generation, petrochemicals and oil field services.

Adjusted operating profit was up 18.4% during the first quarter of 2011, due to better operating performance reported by the exploration and production segment. Adjusted net income for the period was up 22% over the first quarter of 2010 as a result of lower tax rate and better operating performance.

Operating cash flows stood at $5.9 billion at the end of the first quarter and were used to fund capital expenditure of $4.05 billion and to pay down net borrowings, which were down by $1.65 billion from December quarter to $35.2 billion.

The stock is trading at seven times its estimated 2011 earnings with an estimated 38% upside over the next one year. The stock has 60% analyst buy ratings.

4. STR Holdings ( STRI) is a leading global provider of solar encapsulants to the photovoltaic module industry.

For the first quarter of 2011 fiscal, STR reported sales of $92.9 million, compared to $79.3 million in 2010 fiscal first quarter. Sales to Asia drove STRI quarterly numbers rose 34% year-over-year and Asia comprised 46% of its sales in the previous quarter. For the second quarter, the management expects to report consolidated sales in the range of $98 and $101 million.

Net earnings rose to $10.8 million or 39.7% increase compared to first quarter of 2010. Cost reduction measures improved solar gross margin by 127 basis points sequentially.

The stock has gained 12% in the current year and trades at 9.2 times its estimated 2011 earnings. Of the 10 analysts covering the stock, 5 rate a buy. The stock is expected to deliver 49% over the next one year, according to analysts' consensus estimate.

3. Petroleo Brasileiro ( PBR/A) is an integrated Brazilian oil and gas company operating in segments like exploration and production, refining, transportation, and marketing of gas and power.

For the first quarter of 2011, net income increased 42%, boosted by a 7% uptick in domestic sales, led by jet fuel, natural gas, and diesel. Higher crude oil prices and volumes during this period buoyed the company's exploration and production segments, while downstream was negatively affected.

Exploration and production capex stood at $9.2 billion for the quarter, primarily expanding oil and natural gas capacity in the pre-salt areas. In addition to maintaining an expansionary capex program, the company managed to reduce leverage at 17%, lower than its established limit of 35%.

Petrobras' estimated oil reserves stood at about 11 billion to 12 billion barrels of oil equivalent with a production output of more than 2 million boe per day. The recent acquisition of Libra oil field in the Santos Basin would sustain a higher replacement ratio of 144%, in comparison to peers.

The stock is currently trading at 9.6 times its estimated 2011 earnings. Going forward, on average, analysts expect the stock to deliver 54% during the next one year.

2. InterOil Corporation ( IOC) is an independent energy company operating in the upstream, midstream and downstream business segments.

The company's operating segments of corporate, midstream refining and downstream were profitable for the first quarter of 2011, while the development segments of upstream and midstream liquefaction yielded net losses. Net profit reported for the quarter was $700,000 compared to a net loss of $3.1 million during the same quarter of 2010.

Total revenue increased to $243.7 million for the first quarter as against $178.8 million for the same period in 2010. InterOil's earnings before interest, taxes, depreciation and amortization for the quarter had seen a gain of $18.1 million, compared to a gain of $4.9 million in first quarter of 2010. Thus, improved performance of the refining and downstream segments and higher foreign exchange gains contributed towards higher gross profits.

On the exploration prospects, Phil Mulacek, CEO of InterOil, said, "We continued prioritizing exploration prospect inventory by acquiring $7.3 million of additional seismic data which was expensed in the current quarter. Management believes the preliminary results of the seismic data demonstrate high prospectively for our acreage position, with three to four additional reef prospects. The Elk and Antelope fields are most important to us and our experienced management team is focused on delivering LNG results. We continue to work diligently with our LNG partners and look forward to completing a positive FID."

Analysts polled by Bloomberg recommend an impressive 83% buy rating on the stock and an upside of 59% over the next one year.

1. TransAtlantic Petroleum ( TAT) is a vertically integrated international oil and gas company engaged in the acquisition, development, exploration, and production of crude oil and natural gas.

Revenue for the quarter ended March 31, 2011 increased to $32.2 million compared to $12.4 million during the same period in 2010. For the quarter, the company's average realized oil price and average realized natural gas price was around $107 per barrel and $7.29 per thousand cubic feet, respectively.

Net oil and gas production for the first quarter of 2011, after royalty, surged to 353,000 barrels of oil equivalent (boe), rising 142% year-over-year from 146,000 boe for the first quarter of 2010 on improved output at the Selmo oil field. Additional production from the Arpatepe oil field and new production from the Thrace Basin gas fields contributed towards higher oil and gas output.

The stock has 60% buy ratings and is expected to deliver 168% upside over the next one year.

>>To see these stocks in action, visit the 10 Energy Stocks With Upside portfolio on Stockpickr.

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