Cairn Energy
With the price of oil picking up in recent weeks, the outlook for the oil sector seems to be somewhat brighter. And, in response, the share prices of a number of oil companies have firmed up. For example, Cairn Energy (LSE: CNE) has seen its valuation rise by an impressive 16% since the turn of the year.
However, looking ahead, there could be disappointment to come for investors in Cairn Energy. That’s because the company is forecast to report continued losses over the next two years and, given the expected pressure that is set to continue in the oil sector, it could be a case that only the fittest companies survive. That’s not to say that Cairn will cease trading, but rather that investors may flock to the oil stocks with the lowest cost curves and the highest profits, thereby leaving market sentiment in Cairn somewhat downbeat.
Roxi Petroleum
Shares in Roxi Petroleum (LSE: ROXI) are up by 8% today after news that its Chief Financial Officer, Kairat Satylganov, has purchased around £620,000 of shares in the company. Clearly, the market is viewing this as positive news as it shows that a senior director has confidence in the future of the business.
However, Roxi Petroleum continues to suffer delays regarding its A5 deep discovery well, with an obstruction in the well causing testing of it to be pushed back. And, although it has recovered part of the obstruction, a 50m length of coil still remains. As such, and despite its strength today, Roxi Petroleum’s share price could come under pressure in the short run, although it continues to have a bright, albeit risky, long term future.
IGAS Energy
Shares in IGAS Energy (LSE: IGAS) are up 3% today and have been hugely volatile this year, as news flow regarding the future of fracking in the UK has been somewhat mixed. And, looking ahead, it is unlikely to be a smooth ride towards the commencement of IGAS’s fracking operations in the UK, with localised public opinion seemingly against such activities.
Furthermore, IGAS seems to be low on cash, with it having over £100m of debt and around £28m in cash. As such, it may need to raise capital before it can go ahead with its plans and, with it having a rather rich forward price to earnings (P/E) ratio of 20.8, now may not be the right time to buy a slice of it.
Premier Oil
Premier Oil (LSE: PMO has made a strong start to 2015, being up 8% year-to-date. However, it still offers excellent value for money even though it has a P/E ratio of 22.5. That’s because Premier Oil is forecast to increase its bottom line by 17% next year, which puts it on a price to earnings growth (PEG) ratio of just 1.1, which indicates that growth is on offer at a very reasonable price.
So, while further falls in the oil price will undoubtedly have a negative impact on Premier Oil’s valuation, its current margin of safety appears to be relatively generous and indicates that now may be a good time to buy it.
Hunting
Investor sentiment in Hunting (LSE: HTG) has been somewhat weak this year after a relatively disappointing set of results. In fact, its shares are down 6% since the turn of the year but, looking ahead, it could have significant potential.
That’s because Hunting offers a significant margin of safety at its current share price, so that even if the oil price does fall further, it could still offer capital gains moving forward. For example, it has a P/E ratio of just 11.1, which indicates excellent value for money.
And, with Hunting having the potential to become a bid target due to its focus on the US shale industry, now could be a good time to add the stock to your portfolio – even though its outlook remains relatively uncertain.