2015 has been a shocker for the oil industry, but it isnt all desperation. Two of these three stocks appear to have a bright future
That Petrofac Emotion
As far as oil sectorstocks go,Petrofac (LSE: PFC) has had a decent year. Its share price is down just 6% over the last 12 months, a relatively solid turn inthis blighted sector. It has been shielded by its success in winning new business, securing an extra 6bn of projects and takingthe groups backlog to a record $20.9bn. This includes Novemberscontract win to builda sulphur recovery plant for Saudi Armco.
This doesnt mean Petrofaccan withstand cheap oil forever, especially given major investment in flagship projects, such as its billion dollaroffshore installation barge. With revenues forecast to top 5.07bn next year, up from 4.54 in 2015, the future looks pretty bright, especially given the cost-cutting and project scrapping across the oil and gas sector. Earnings per share look set to soar a massive 177% next year, as pre-tax profits rise from 150m to 391m. Imagine what a rise in the oil price would do.
It would certainly turbo-charge the share price. Despite its impressive recent performance, Petrofac trades at an affordable-looking seven times earnings. Its yield is a rewarding 5.5% and unlike other dividends in the oil sector, it looks pretty safe, comfortably covered 2.6 times.
Time To Swoop?
Last time I looked atFalcon Oil & Gas(LSE: FOG) I thought it wasmore promising than most oil explorers after itsrecent drilling success in the Beetaloo Basin, Australia. Itsnine-well programme runs until 2018 and last week it reported encouraging preliminary results from the drilling of the first threeAustralian wells, which indicated favourable shale properties with excellentgas shows indicating the likelihood of high levels of gas saturations.
Falcon is debt-free, with$9.8m in cash. Chief executivePhilip OQuigley has also highlighted the companys strong cash position, fully fundeddrilling programme and high quality assets, which bodes well for 2016. The oil industry may be in a fog, but Falcons future is clearer than most. That said, the share price is down 32% in the last six months, so plenty of risks remain.
So Xcited
This has been a tough year for AIM-listed oil appraisal and development companyXcite Energy (LSE: XEL). At todays 18p, itis well below its 52-week high of 44p. Its flagshipBentley heavy oil field in the Northern North Sealooksexcitingon paper, with proved plusprobable reserves worth $2.3bn. In a retrenching industry,securing development partners and financing to develop the field is proving challenging. The only upside is that fallingindustry costs should reduce its outlay if it can find the funds to drive the project.
Q3 results showed a net loss of $0.3m to 30 September, but that is down from $4.3m in Q3 last year.Its cash balance is now $27.9m, slippingfrom$34m at the end of June, so it still has some breathing space. What it needs is a partner, but suitors are in short supply in todays market. Xcite says it has completedtechnical and economic due diligence witha potential partner, which has now movedtowards commercial discussions, but nothing has been firmed up yet. Xcitewould be risky at the best of times, and these certainly arent the best of times.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Petrofac. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.