The rout in the oil & gas sector rightly has value investors salivating at the prospect of unearthing shares with significant upside at bargain prices. Petrofac (LSE: PFC) and Premier Oil (LSE: PMO) are both trading at less than nine times forecast earnings, suggesting that both could be in for gains of 100% or more when crude prices rebound.

Keep on pumping

Oil & gas services provider Petrofac has the benefit of consistent revenues whatever the price of oil, as long as producers continue pumping. And Petrofac’s main customers are Middle Eastern national oil companies that don’t appear ready to give up market share, no matter how long crude prices remain low. In fact, its order backlog grew 14% year-on-year to record levels as customers raced to keep ageing wells pumping. This goes some way to explaining why analysts are forecasting a staggering 174% increase in earnings per share for 2016. Total’s North Sea Laggan-Tormore project finally coming on-line will also be a major weight off the shoulders of executives as their move to branch out into offshore projects resulted in a $400m loss. Management appears to have learned from this mistake and its focus is now onshore projects, where margins are higher and the company has the most experience.

Petrofac’s balance sheet is in an enviable position, with cash reserves of $800m and a very manageable $1bn of net debt. Dividend payments are currently yielding 5.2% and are well covered at two times earnings, suggesting they’ll be safely maintained, if not increased, over the medium term. With shares trading at a mere 7.8 times forecast earnings and a healthy dividend, I believe Petrofac is a significant bargain. Furthermore, unlike the rest of the oil & gas industry, the company has strong growth prospects, whether or not crude prices rebound quickly. At current prices, I believe Petrofac has the potential to double for investors over the medium term.

Coping with low prices

Premier Oil saw shares jump 97% last Monday after resuming trading following the reverse takeover of E.ON’s North Sea assets. Although the shares have now given up half of that increase, this remains an astute purchase and provides significant upside potential for long-term shareholders. This deal adds 15k barrels per day of production and will immediately improve cash flow. Management has reacted well to low crude prices by bringing operation costs per barrel down to roughly $16 and cutting 2016 capex spending by 32% year-on-year. While net debt remains a worrying $2.4bn, only $670m is due before 2019. With cash and credit lines of $1.2bn available, the company is well-positioned to ride out several years of low crude prices.

Once crude prices rebound, and they inevitably will, Premier is in a very good spot. Management has sold off higher-cost assets and bought up better ones at bargain prices, increasing total production by nearly 20% this year. Shares are currently trading at a very cheap nine times forecast earnings. While share prices may remain flat until oil rebounds, I believe Premier is well-positioned to increase significantly in value once crude prices trend upwards.

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Ian Pierce 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.