Opportunity in Oil: As Prices Fall, EOG Shares Could Rise

With the price of oil coming down even further this week, it's so important to make distinctions among energy companies. The highly levered, more speculative names like Sandridge Energy, Rexx Energy and Halcon Resources are in trouble. They’re the ones that got in late, paid high prices for wells, didn’t hedge well and took down a lot of debt betting the price of crude would be high when they brought oil to the market. These are the ones that are constantly selling off properties to pay the bills, a strategy that is risky to invest behind. Owning them, even at these depressed levels - is playing with fire. On the other hand, a lean, well-run major independent oil company like EOG Resources is a buy. It has the best properties and arguably the best management team in the industry. EOG routinely hedges their production to lock-in better prices. They aren’t about playing the commodities markets, they’re about discovering good prospects and exploiting them. Last week, EOG raised its production forecasts and showed you that oil could keep plummeting and the company will still make fortunes. Before you cast off the whole energy herd, recognize that there are savvy operators out there like EOG that don't depend on oil prices to thrive.