7 Top-Rated Energy Stocks With Upside

NEW YORK (TheStreet) -- Chesapeake Energy (CHK), Marathon Oil Corporation (MRO), Chevron (CVX), Gran Tierra Energy (GTE), Advantage Oil & Gas (AAV), Halliburton (HAL) and Denbury Resources (DNR) are attractive and are positioning for long-term appreciation.

These stocks outperformed the Dow in the last month, gaining 13% vs. the Dow's 7.5% increase. Besides, they could generate a mean return of 40% over the next year and, according to a Bloomberg consensus, have average buy ratings of 74%. We list these stocks in ascending order of buy ratings, with Halliburton leading the pack, having 89% buy ratings from the covering analysts.


7. Chesapeake Energy is an Oklahoma-based energy player developing unconventional natural gas and oilfields onshore in the U.S.

Net income for the second quarter was $510 million, up from $255 million in the same period last year. Increased profitability resulted from higher operating income that doubled to $985 million from the corresponding quarter of 2010. Revenue grew 50% during this period to $3.3 billion.

For the second quarter of 2011, the company reported average daily production of 3.049 billion cubic equivalent of natural gas, a 9% increase year-over-year, but down 2% sequentially following the sale of its assets in Fayetteville Shale.

Oil price inflation and the proposed drilling program in the Utica Shale have amplified the company's capital expenditure for fiscal 2011 and 2012 by $500 million, to $6.5 billion each year. Recently, Sterne Agee initiated a buy on the stock. Analysts expect the stock to deliver 34% upside over the next year. With 58% buy ratings, the stock is trading at 9.9 times its estimated 2011 earnings.

6. Marathon Oil Corporation is an integrated international energy company operating in three segments: Exploration and production, oil sands mining, and integrated gas.

For second-quarter 2011, adjusted income from continuing operations was $689 million, vs. $440 million in the same quarter the prior year. Total segment income was $713 million compared to $396 million from continuing operations in the same quarter of 2010.

Marathon completed the spin-off of its downstream business during 2011 second quarter and acquired assets worth $3.5 billion in the Eagle Ford shale in Texas.

"Going forward, we are confident that we have the foundation in place to deliver 5% to 7% compound average production growth during the period 2010-2016. This strong growth profile is underpinned by our pending top-five acreage position in the core, liquids-rich area of the Eagle Ford, as well as solid positions across the Bakken, Anadarko Woodford and Niobrara liquids-rich resource plays," said Clarence P. Cazalot Jr., Marathon Oil's chairman, president and CEO.

With analysts' buy ratings of 63% and upside potential of 29%, the stock looks a good bet over the next year. It is trading at 7.1 times its estimated 2011 earnings.

5. Advantage Oil & Gas engages in the exploration and production of oil and natural gas at its Glacier property in Alberta, Canada.

The company reported 2011 second-quarter production of 23,719 barrel oil equivalent per day (boe/d), increasing 22%, due to better-than-expected well performance at its Glacier property. Besides, operating expenses for the second quarter decreased 17% to $6.74/boe, vs. the previous quarter.

The company announced a capital budget of $216 million on July 4, 2011, to be spent over the next 12 months ending June 30, 2011, focused on the phase-4 development program at Glacier for about $200 million.

Management estimates production at around 22,900 boe/d to 23,400 boe/d for the second half of 2012. The stock has 54% upside over the next year with 67% analysts recommend it as a buy, as per a Bloomberg consensus.

4. Denbury Resources is a U.S.-based oil and natural gas company. It is the largest oil and natural gas producer in the states of Mississippi and Montana, and holds major operating acreage in the Rocky Mountains and the Gulf Coast.

Denbury's oil and natural gas production averaged 64,919 boe/d during the second quarter of 2011 compared to 63,585 boe/d during the same quarter the prior year. Revenue grew 21% during the quarter, boosted by crude oil and natural gas production.

Adjusted net income increased 92% to $259 million, while adjusted operational cash flow was $398 million. The company's capital expenditure budget for 2011 increased to $1.35 billion, excluding acquisitions.

Gaining 22% in the last month, the stock is trading at 13.7 times its estimated 2011 earnings with 51% upside. It has a 74% buy rating.

3. Chevron is an energy major specializing in both upstream and downstream operations. It reports its third-quarter earnings today.

The company resumed exploration and development drilling activity in the Gulf of Mexico and acquired new upstream resource opportunities in Kazakhstan, Australia and the U.S. during the 2011 second quarter. Also, Chevron completed the sale of its fuels marketing and aviation businesses in three Central American countries as well as other assets in China and North America.

During the third quarter, lower crude oil realization is expected to reduce upstream gains. Downstream earnings could be higher, reflecting gains made from asset sales. Both the upstream and downstream operations could benefit from the dollar strengthening against major currencies during the quarter.

The company's capital and exploratory expenditure was higher during the first six months of 2011 at $13.4 billion, up from $9.4 billion in the corresponding period last year. Chevron's stock rose 25% in the last one-year and it is trading at 7.9 times its estimated value. The stock has an 81% buy rating and is likely to return 14% over the next year.

2. Gran Tierra Energy is a Canada-based upstream energy company owning oil and gas properties in Colombia, Argentina and Brazil.

Revenue almost doubled to $162 million during the second quarter of 2011, compared to $84 million in the same quarter last year, due to increased production and higher crude oil prices. Net income stood at $31.5 million vs. $17 million during the same period in 2010.

As of June 30, 2011, higher capital spending resulted in cash and cash equivalents of $211 million, compared to $355 million in the previous quarter.

"Several significant milestones were achieved in the second quarter of 2011, positioning the Company to achieve continued growth into the future. The completion of the Moqueta to Costayaco flow-line and initiation of production was a major achievement. This is the first time that an oil field in Colombia has been discovered and test production initiated with operations entirely supported by helicopter and without access by road, minimizing the environmental footprint of Gran Tierra Energy's operations at this early stage of development," commented, Dana Coffield, CEO.

Analysts expect the stock to gain around 47% over the next year, and it is trading at 10.5 times its estimated 2012 earnings. The stock has analyst buy ratings of 88%.

1. Halliburton is an oil-field services company providing services and products for the exploration, development and production of oil and natural gas.

For the 2011 third quarter, HAL reported net income of $683 million, increasing from $544 million in the year-earlier quarter. Consolidated revenue improved to $6.5 billion from $4.6 billion in the same quarter the prior year. Operating performance was enhanced by better price realization and utilization in North America.

On operating performance, CEO Dave Lesar said: " Compared to the second quarter, our Completion and Production division grew revenue and operating income by 11% and 16%, respectively, and our Drilling and Evaluation division grew revenue and operating income by 9% and 14%, respectively."

At the end of the quarter, cash balance was $1.8 billion. With a buy rating of 89% and upside potential of 54%, the stock looks a good bet over the next year. It is trading at 10.7 times its estimated 2011 earnings.

>>To see these stocks in action, visit the 7 Top-Rated Energy Stocks With Upside portfolio on Stockpickr.

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