10 Energy Stocks for 2012

NEW YORK (TheStreet) -- Bullish sentiment is buoying the energy sector right now, and energy prices may spike next year, boosting top energy stocks.

Crude oil prices recovered 28.5% to $97.77 per barrel as of Monday, after easing to 52-week lows of $76.07 on Oct. 4.

Continued political instability in the Middle East and China's soaring demand are seen as the drivers of higher prices going forward.

Data from Zacks Investment Research show the energy sector bested all others in the third quarter, with earnings and year-over-year revenue growth of 60.06% and 32.05%, respectively.

Goldman Sachs recently resumed coverage of oil-service stocks, rating most of the stocks in the sector either conviction buys or buys. Analysts believe that land rig demand in the U.S. has entered the second-phase of a multiyear pickup.

The following 10 stocks are listed based on upside implied by average analyst price targets.

10. Approach Resources ( AREX) is an independent oil and gas explorer and producer. It focuses on reserves in oil shale and tight sands. The company has major properties located in the Permian Basin in western Texas, the East Texas Basin and the Chama Basin in Northern New Mexico.

Of the 30 analysts covering the stock, 67% rate it a buy. On average, analysts have a $33.68 12-month price target, which is 12.9% greater than the stock's current price.

For the third quarter of 2011, the company recorded net income of $7.1 million, or 25 cents per share, vs. $2.1 million, or 10 cents a share, in the year-earlier quarter. Revenue in the latest quarter was $28 million, up from $14.9 million a year earlier.

Total production for the quarter increased 46% year over year. Oil and natural gas liquids production for the quarter soared 148%.

Meanwhile, 2012 production is seen in the range of 2,800 and 3,000 million barrels of oil equivalent, a 22% increase over the 2011 estimate.

9. BP ( BP) is an international oil and gas producer and refiner.

Of the 17 analysts covering the stock, 67% rate it a buy. Analysts' average 12-month price target for the stock is $52.19, about 13.4% higher than the current price, according to Bloomberg.

For the third quarter, BP's replacement cost profit was $5.1 billion, compared with $1.8 billion in the same quarter a year before.

Total revenue and other income was $97.6 billion, up 30.8% from $74.6 billion in the year-ago quarter. Net profit for the quarter was $5 million, up from $1.8 million in the same period last year.

Recently, BP announced a dividend of 42 cents per share payable Dec. 19 to shareholders of record Nov. 4.

BP is evaluating resumption of oil production in Libya, according to industry reports.

8. Chevron ( CVX) is an integrated energy company. It explores, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemical products; generates power and produces geothermal energy; provides energy-efficiency solutions; and develops energy resources of the future, including biofuels.

Of the 27 analysts covering the stock, 78% recommend a buy and 19% rate a hold. The stock's average 12-month price target is $122.31, about 15.9% higher than the current price, according to a Bloomberg consensus.

For the third quarter of 2011, Chevron reported total revenue of $64.4 billion, up 29.5% from $49.7 billion in the same quarter previous year. Net income grew 110.8% to $7.8 billion, or $3.92 per diluted share, from $3.7 billion, or $1.87 per diluted share, in the corresponding period prior year. In October, the company raised its quarterly dividend by 3.8% to 81 cents per common share payable Dec. 2011.

The company reports that subsidiary Chevron Brasil Upstream Frade Ltda has emitted 2400 barrels of oil from ocean floor seep lines in the vicinity of its Frade Field since seeps were detected on Nov. 9.

The company recently announced a 17% hike in its capital spending plans for 2012 to $32.7 billion from the $28 billion it expects to invest by the end of 2011. Of this sum, $3.6 billion has been budgeted for downstream operations.

Chevron plans to spend about 30% of the company's 2012 upstream capital budget of approximately $8.55 billion for further development of the recently acquired acreage in the Marcellus Shale, the Wolfcamp play in West Texas, and the Pattaini Basin offshore Thailand. Chevron expects to spend $40 billion over the next 25 years to build a steam system to improve oil output from a field in Saudi Arabia, according to Bloomberg.

7. National Oilwell Varco ( NOV) is an oil-services company.

Of the 34 analysts covering the stock, 91% rate it a buy. Analysts' average 12-month price target for the stock is $88.76, about 22% higher than the current levels, according to data compiled by Bloomberg.

The company reported revenue of $3.74 billion for the third quarter of 2011, up 24.2% from $3.01 billion in the same quarter a year before. Net income increased 31.6% to $532 million, or $1.25 per diluted share, from $404 million, or 96 cents per diluted share, in the year-ago period. During the third quarter of 2011 the Company's Rig Technology segment booked a record $3.94 billion in new orders.

In October, National Oilwell Varco announced the completion of its Ameron acquisition. Recently, the company increased its quarterly dividend of 12 cents per share from 11 cents per share. The dividend is payable Dec. 16 to shareholders of record Dec. 2.

Full-year 2011 revenue is pegged at $14.4 billion, up 18% from $12.1 billion in the preceding year. Earnings for the year are seen at $1.98 billion, or $4.67 per share, up 17% from $1.69 billion, or $4.09 per share, in fiscal 2010.

At the recent Jefferies Energy Conference, Pete Miller, CEO of National Oilwell, said that the growing demand for drilling rigs in the onshore international market may favor the company. In the last six months, the company has seen an uptrend in inquiries for its onshore rigs from customers, including Brazil and Poland, Miller added.

6. Anadarko Petroleum ( APC) is among the world's largest independent oil and natural gas exploration and production companies. The company operates in the U.S., Algeria, Brazil, East and West Africa, China, Indonesia, and New Zealand.

Of the 25 analysts covering the stock, 81% rate it a buy. Analysts polled by Bloomberg have an average 12-month price target of $100.63 for the stock, about 25.3% higher than the current price.

For the third quarter of 2011, Anadarko reported sales revenue of $3.2 billion, up 41% from $2.5 billion in the same quarter previous year.

The company generated discretionary cash flow of $1.88 billion and had capital expenditures of $1.30 billion during the quarter, resulting in free cash flow of approximately $58 million. During the third quarter, sales volume totaled 61 million barrels of oil equivalent (boe), vs. 58 million boe in the third quarter of the year before.

The company declared a quarterly dividend of 9 cents per share on its outstanding common stock payable Dec. 28 to stockholders of record Dec. 14. For the fourth quarter, APC expects sales volume in the range of 60 million to 63 million boe.

5. Apache ( APA) is an independent natural gas and crude oil producer. The company operates in the U.S., Canada, Egypt, the North Sea (U.K.), Australia and Argentina.

Of the 30 analysts covering the stock, 79% rate it a buy. Analysts' average 12-month price target for the stock is 37.9% higher than the current stock price, according to a Bloomberg consensus.

For the third quarter of 2011, Apache reported revenue of $4.32 billion, an increase of 43.5% from $3.01 billion recorded in the same quarter previous year. Net profit increased 28.8% to $983 million, or $2.50 per diluted share, from $778 million, or $2.14 per diluted share, in the corresponding period last year. For the third quarter, output stood at 752,000 boe per day, up 13% from the prior year's same quarter.

Net cash from operating activities totaled $2.4 billion, up 43% from $1.7 billion in the third quarter of 2010. The company recently declared a regular cash dividend of 15 cents per share payable Feb. 22, 2012 to stockholders of record on Jan. 23.

On Dec. 9, the European Commission cleared Apache's acquisition of U.K.-based Mobil North Sea. Apache has entered into a joint venture with a Texas-based Tag Oil to begin seismic explorations to Ngati Kere at Rongomaraeroa marae in Porangahau, The New Zealand Herald reports.

4. Devon Energy ( DVN) is an independent natural gas and oil producer. It has onshore operations in the U.S. and Canada, while its offshore operations are located in Brazil and Angola. Besides, Devon also engages in marketing and midstream operations.

Of the 32 analysts covering the stock, 72% rate it a buy. On average, analysts have a $92.50 12-month price target, up 38.3% from current levels.

For the third quarter of 2011, the company recorded total revenue of $3.5 billion, compared with $2.3 billion in the year-ago quarter. Net income for the quarter stood at $1.0 billion, or $2.5 per share.

For the quarter, liquids production averaged 226,000 barrels per day, indicating 17% increase from the prior-year quarter. Total oil, natural gas and natural gas liquids production was 661,000 boe per day, an 8% increase. Devon's rig count at the end of September was 70, vs. 67 in the same month preceding year.

Recently, the company received regulatory approval from the Alberta Energy Resources Conservation Board and Alberta Environment and Water for Jackfish 3, its third 100%-owned oil sands project in Canada. The project is scheduled to start in Jan. 2012 with production targeted for late 2014. Estimated production is an average 35,000 barrels of oil per day before royalties, representing 300 million barrels of gross recoverable oil. Devon expects to deploy approximately $1.3 billion of capital on Jackfish 3 through start-up.

In the last week of November, the company declared a quarterly cash dividend of 17 cents on its common stock for the first quarter of 2012. The dividend is payable Mar. 30, 2012 to shareholders of record March 15.

3. Patterson-UTI Energy ( PTEN) owns and operates a fleet of land-based drilling rigs in the U.S. The company has 356 marketable land-based drilling rigs. It also provides pressure-pumping services to oil and natural gas operators in Texas and the Appalachian Basin.

Of the 30 analysts covering the stock, 67% rate it a buy. On average, analysts expect 53% upside to $30.30 in value from current levels.

Net income for the third quarter of 2011 was reported at $81.9 million, or 53 cents per share, compared with $29.4 million, or 19 cents per share, in the year-ago quarter. Meanwhile, revenue surged 77.8% to $674 million. The company's pressure pumping business recorded 13% sequential increase in revenue. For the quarter, the average rig count was 221, including 209 in the U.S. and 12 in Canada, which compares with 202 rigs in the prior quarter -- 199 in the U.S. and 3 in Canada. Average revenue per operating day increased $440.

For the two months ended November, the company had 231 drilling rigs operating, including 219 rigs in the U.S. and 12 rigs in Canada.

The company has a long-term contract revenue backlog of approximately $1.7 billion for the drilling business, as of September. Meanwhile, it estimates almost 124 rigs operating under long-term contracts during the fourth quarter and an average of 96 rigs for 2012. It expects to add almost 140,000 horsepower for delivery in 2012. A regular quarterly cash dividend of 5 cents per share is payable on Dec. 30 to shareholders of record Dec. 15.

2. Baker Hughes ( BHI) is a an oilfield-services company. It also provides industrial and other products and services to the downstream refining, and process and pipeline industries in more than 80 countries.

Of the 35 analysts covering the stock, 82% rate it a buy. There are no sell ratings on the stock. On average, analysts expect upside of 53.9% to $77.26 in value from current levels.

For the third quarter of 2011, the company reported net income of $706 million, or $1.61 per diluted share, which compares with $255 million, or 59 cents per diluted share, in the year-ago quarter. Revenue for the quarter increased 27% to $5.18 billion from the same quarter last year. At the end of the quarter, the worldwide rig count increased to 3,555, vs. 3,089 at the end of the year-ago quarter.

The company's international rig count for November was 1,185, in contrast to 1,130 in the same month last year. Meanwhile, the U.S. rig count increased to 2,011 from 1,683, while worldwide rig count grew to 3,683 from 3,233 in November 2010.

Baker Hughes recently announced it would invest $36 million in its flagship research and development center Centrilift, focused on submersible pump systems for oilfield wells in Claremore. This expansion will make room for long-term plans and construction is expected to be completed by early 2013.

For the fourth quarter, the company estimates delivering 15% in international margins. For 2011, capital expenditure, excluding acquisitions, is seen in the range of $2.3 billion to $2.4 billion.

1. Halliburton ( HAL), an oilfield-services company, operates in two business segments: Completion and Production, and Drilling and Evaluation. It provides a range of services and products for the exploration, development, and production of oil and natural gas in almost 80 countries worldwide.

Of the 38 analysts covering the stock, 89% rate it a buy. There are no sell ratings on the stock. On average, analysts have a 12-month price target on the stock of $54.38, up 64.4% from current levels.

Net income for the third quarter of 2011 was reported at $683 million, or 74 cents, which compares with $544 million, or 60 cents per share, in the same quarter preceding year.

Consolidated revenue for the quarter increased to $6.5 billion from $4.7 billion in the year-ago quarter. Capital expenditure for the first nine months of 2011 totaled $2.2 billion.

At the end of the quarter, rigs operating worldwide were 3,557, against the earlier-year number of 3,093. The expansion in oil rigs was 32.6% to 2,277 from 1,717 in the year-ago quarter.

In early November, the company declared a fourth-quarter 2011 dividend of 9 cents on its common stock payable Dec. 23 to shareholders of record Dec. 2.

With 75% of HAL's revenue coming from North American operations, RBC analysts foresee the company benefiting from the expansion of shale plays and hydraulic fracturing, or fracking, in the U.S in 2012. The research firm estimates margins in the mid-30% range on the back of a hold in pressure pumping pricing and the company's strong supply chain management.

>>To see these stocks in action, visit the 10 Energy Stocks for 2012 portfolio on Stockpickr.

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