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Jonathan Yates
Are Undervalued Oil and Gas Companies the Best Long Term Buy?

While many oil and gas companies such as Chevron (NYSE: CVX), up 12.40% for 2013, and Murphy Oil (NYSE: MUR), up 15.80% for the same period, have risen this year, there are still stocks in the sector that are undervalued, based on the assets.  These include Continental Resources (NYSE: CLR ), Halliburton (NYSE: HAL), Americas Petrogas (TSX: BOE), and EQT Corporation (NYSE: EQT).

All of these companies have very appealing features for investors.  Despite that, the stock prices indicate that the companies are not fully valued. According to an article in Fortune by Jon Birger, “Seeking a Gusher a U.S. Oil and Gas, many “…oil and gas stocks have been laggards.”

The chart below demonstrates the story:


There is much to tempt the long term investor in each of these oil and gas companies.  Continental Resources, according to Genuity Analyst John Gerdes, is expected to double production by 2015.  Americas Petrogas has a strong asset base.  Halliburton is the service leader in most shale oil plays in the United States.  EQT Corporation owns 565,000 acres in the Marcellus Shale in West Virginia and Pennsylvania, which is an area with low production costs and high gas yields.

In his Fortune piece, Birger writes, “That suggests avoiding the so-called supermajors like ExxonMobil and Chevron, because their immense size makes production growth expensive and risky.”  While ExxonMobil and Chevron might be avoided, according to Birger, that is clearly not the case with the energy group.  For investors who want to profit from the long term growth potential in the oil and gas sector, EQT Corporation, Americas Petrogas, Halliburton, and Continental Resources are all attractive for the long term investor.

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