NEW YORK (TheStreet) -- Oil prices have been under significant pressure over the last year, with crude oil prices spiking on Monday, only to fall again on Tuesday.

The commodity had spiked more than 8% to its best close in six weeks on Monday after the U.S. Energy Information Administration cut its estimates of U.S. production and on reports the Organization of Petroleum Exporting Countries was considering cutting its own. However, oil prices pulled back on Tuesday on concerns over weakening demand in China, the world's second-largest economy.

"Crude oil prices came under renewed pressure through the third quarter as the global supply overhang showed little improvement while faith in a demand-led rally was shaken by China's currency revaluation," analysts at BMO Capital Markets (a unit of Bank of Montreal (BMO - Get Report) ) wrote in a note to clients on Tuesday.

According to BMO Capital markets, Brent crude oil prices averaged roughly $50/bbl in the third quarter, down from $63 in the second quarter and from $103 in the same period last year. As well, West Texas Intermediate (WTI) averaged approximately $45/bbl compared to $58 in Q2/15 and $97 in Q3/14, the note said.

"We expect crude oil prices to remain under pressure over the balance of 2015 and into 2016 as the global supply overhang takes longer to work off; however, supply and demand are dynamic and we anticipate oil prices' firming somewhat in late-2016 in anticipation of a tighter supply-demand balance in 2017," the note said. "We are lowering our 2015 assumption for Brent to $54.50/bbl from $62 and our 2016 assumption to $57.50 from $65."

So what does that mean for oil stocks? The analysts say investors should "remain cautious as the near-term outlook for crude oil remains uncertain and volatile," according to the note. "We would continue to focus on companies with strong balance sheets that are able to generate growth without the help of rising commodity prices." TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio, said oil prices may be bottoming and oil stocks may be interesting.

BMO Capital Markets named six energy companies as top recommendations. Here is the list, paired with ratings from TheStreet Ratings for added perspective. And when you're done be sure to check out Oppenheimer's stocks to "buy on weakness."

TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

 

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1. Anadarko Petroleum Corp. (APC - Get Report)
Sector: Energy/Oil & Gas Exploration & Production
Market Cap: $36 billion
YTD Return: -13.2%

BMO Capital Markets Rating/Price Target: Outperform/$100

TheStreet Rating: Sell, D+
TheStreet Said:  
TheStreet Ratings team rates ANADARKO PETROLEUM CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ANADARKO PETROLEUM CORP (APC) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share. "

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 73.1% when compared to the same quarter one year ago, falling from $227.00 million to $61.00 million.
  • Net operating cash flow has decreased to $1,243.00 million or 49.51% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.55%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 73.33% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • ANADARKO PETROLEUM CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ANADARKO PETROLEUM CORP swung to a loss, reporting -$3.51 versus $1.57 in the prior year. This year, the market expects an improvement in earnings (-$1.80 versus -$3.51).
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, ANADARKO PETROLEUM CORP's return on equity significantly trails that of both the industry average and the S&P 500.

 

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2. Cimarex Energy Co. (XEC - Get Report)
Sector: Energy/Oil & Gas Exploration & Production
Market Cap: $10 billion
YTD Return: 4.3%

BMO Capital Markets Rating/Price Target: Outperform/$150

TheStreet Rating: Hold, C
TheStreet Said: 
 
TheStreet Ratings team rates CIMAREX ENERGY CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CIMAREX ENERGY CO (XEC) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, XEC has a quick ratio of 2.36, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 34.4%. Since the same quarter one year prior, revenues fell by 33.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 25.68%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 480.58% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CIMAREX ENERGY CO's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to $257.37 million or 38.97% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

Must Read: 12 Oil Stocks Down 30% or More

 

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3. Matador Resources Co. (MTDR - Get Report)
Sector: Energy/Oil & Gas Exploration & Production
Market Cap: $1.9 billion
YTD Return: 13.2%

BMO Capital Markets Rating/Price Target: Outperform/$25

TheStreet Rating: Hold, C
TheStreet Said:   
TheStreet Ratings team rates MATADOR RESOURCES CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate MATADOR RESOURCES CO (MTDR) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The current debt-to-equity ratio, 0.41, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that MTDR's debt-to-equity ratio is low, the quick ratio, which is currently 0.69, displays a potential problem in covering short-term cash needs.
  • Despite the weak revenue results, MTDR has outperformed against the industry average of 34.4%. Since the same quarter one year prior, revenues fell by 14.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • MATADOR RESOURCES CO has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MATADOR RESOURCES CO increased its bottom line by earning $1.55 versus $0.76 in the prior year. For the next year, the market is expecting a contraction of 96.1% in earnings ($0.06 versus $1.55).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MATADOR RESOURCES CO's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $20.04 million or 75.41% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Must Read: Oppenheimer's 10 Stocks to 'Sell on Strength'

 

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4. Newfield Exploration Co. (NFX
Sector: Energy/Oil & Gas Exploration & Production
Market Cap: $5.3 billion
YTD Return: 22.8%

BMO Capital Markets Rating/Price Target: Outperform/$37

TheStreet Rating: Hold, C
TheStreet Said:   
TheStreet Ratings team rates NEWFIELD EXPLORATION CO as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate NEWFIELD EXPLORATION CO (NFX) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has slightly increased to $372.00 million or 1.08% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -20.29%.
  • The debt-to-equity ratio is somewhat low, currently at 0.75, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that NFX's debt-to-equity ratio is low, the quick ratio, which is currently 0.58, displays a potential problem in covering short-term cash needs.
  • Despite the weak revenue results, NFX has outperformed against the industry average of 34.4%. Since the same quarter one year prior, revenues fell by 23.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 4409.1% when compared to the same quarter one year ago, falling from -$22.00 million to -$992.00 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, NEWFIELD EXPLORATION CO's return on equity significantly trails that of both the industry average and the S&P 500.

 

SU Chart SU data by YCharts

5. Suncor Energy Inc. (SU - Get Report)
Sector: Energy/Integrated Oil & Gas
Market Cap: $40.8 billion 
YTD Return: -11.1%

BMO Capital Markets Rating/Price Target: Outperform/$43

TheStreet Rating: Hold, C
TheStreet Said: 
TheStreet Ratings team rates SUNCOR ENERGY INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate SUNCOR ENERGY INC (SU) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income increased by 245.5% when compared to the same quarter one year prior, rising from $211.00 million to $729.00 million.
  • The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.18, which illustrates the ability to avoid short-term cash problems.
  • Despite the weak revenue results, SU has outperformed against the industry average of 34.4%. Since the same quarter one year prior, revenues fell by 22.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, SUNCOR ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • SU's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 32.32%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
VRML Chart VRML data by YCharts

6. Vermilion Inc. (VRML - Get Report)
Sector: Energy/Integrated Oil & Gas
Market Cap: $105.8 million 
YTD Return:  2.5%

BMO Capital Markets Rating/Price Target: Outperform/$60

TheStreet Rating: Sell, E+
TheStreet Said: 
TheStreet Ratings team rates VERMILLION INC as a Sell with a ratings score of E+. TheStreet Ratings Team has this to say about their recommendation:

"We rate VERMILLION INC (VRML) a SELL. This is based on some significant below-par investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself. "

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Health Care Equipment & Supplies industry and the overall market, VERMILLION INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has decreased to -$4.53 million or 29.10% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • VRML has underperformed the S&P 500 Index, declining 15.18% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Health Care Equipment & Supplies industry average. The net income has decreased by 3.8% when compared to the same quarter one year ago, dropping from -$3.99 million to -$4.14 million.
  • The gross profit margin for VERMILLION INC is rather high; currently it is at 53.94%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, VRML's net profit margin of -435.01% significantly underperformed when compared to the industry average.

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