But investors have not given up on strong brands like Exxon Mobil (XOM) , down 7.9% for the year, and Schlumberger (SLB) , down 3.3%. Both stocks are up more than 5% in the past week, fueling speculation that oil prices have finally bottomed and a rebound is under way.
Nonetheless, as a group, the sector has posted a year-to-date aggregate decline of 6.9%, trailing both the Dow Jones Industrial Average, up 8.9%, and the S&P 500, up 13%, which are poised to end the year at or near all-time highs. Take a look at the chart below.
XOM data by YCharts
All told, oil prices are down 43.6% in the trailing 12 months, leading to a 9.5% decline in the Energy Select Sector ETF (XLE) -- home to some of the top energy plays such as Chevron (CVX) (down 9.3% year to date) and Occidental Petroleum (OXY) (down 14%). Despite the declines in their stock prices, however, several companies are still growing profits and meeting production targets, making them good contrarian picks.
The first company to consider buying is Schlumberger. For the January quarter, Schlumberger is projected to grow full-year 2014 earnings per share to $5.62, representing an 18.3% year over year jump, according to CNN Money. If fiscal 2016 estimates of $6.35 per share are reached, Schlumberger is on track to grow earnings by almost 34% in two years.
Part of the optimism has to do with the company's ability to shield itself from things it can't control, including U.S. and European economic sanctions against Russia over the Ukraine crisis. In August, Schlumberger said these issues would have limited impact on its operations. This was proven true as both third-quarter revenue and profits beat analysts' estimates. Analysts have a 12-month price target of $119 on the stock, suggesting gains of more than 36%.
Investors should also take a look at ConocoPhillips (COP) (down 1.1% on the year). Despite trimming next year's budget to offset weak oil prices, these cuts won't be at the expense of growth. Conoco still projects reaching 3% to 5% growth for its oil and gas output in 2015. And this should bode well for the stock, which has a consensus Buy rating from 23 investment analysts polled, according to CNN Money.
Optimism about the stock has to do with the company's ability to boost its bottom line despite weak oil prices. In its third-quarter, despite weak revenue, Conoco still grew net income by 8% year over year and grew earnings-per-share by 8.5% year over year. What's more, the company pays a yield of 4.05%, topping both Exxon and Chevron, which pay yields of 2.85% and 3.57%, respectively.
Chesapeake Energy (CHK) is another stock to keep an eye on in 2015. Although shares are down more than 22% on the year, Chesapeake is actively buying back its stock. Management recently discussed plans to spend $1.26 billion to take all of the outstanding preferred shares off the market.
In addition, Chesapeake, which is the No. 2 natural gas producer in the U.S., is actively looking for ways to secure future production growth and increase its exposure in areas where it can capitalize on improved drilling activity in the U.S.
In July, the company announced a deal with RKI Exploration in which Chesapeake will exchange 137,000 net acres and its entire interest in 67 gross wells in the North Power River Basin. This means Chesapeake has almost doubled its interest in that area, going from 38% stakes to 79%, ensuring it will have no issues with production for the next several years. At around $19, look for the shares to reach $25 in the next 12 to 18 months, yielding gains of 30%.