The last few months have been dismal for oil stocks. Indeed, with the price of oil falling from over $110 per barrel, it now stands at just $83. That?s a fall of around 25% in a matter of months and, perhaps more importantly, there seems to be little sign that it will bounce back strongly in the near term.
As a result, oil stocks such as Tullow (LSE: TLW), BG (LSE: BG) and Premier Oil (LSE: PMO) have fallen heavily in recent months, with…
The last few months have been dismal for oil stocks. Indeed, with the price of oil falling from over $110 per barrel, it now stands at just $83. That’s a fall of around 25% in a matter of months and, perhaps more importantly, there seems to be little sign that it will bounce back strongly in the near term.
As a result, oil stocks such as Tullow (LSE: TLW), BG (LSE: BG) and Premier Oil (LSE: PMO) have fallen heavily in recent months, with the three oil producers seeing their share prices drop by 32%, 10% and 21% respectively in the last three months alone.
However, such falls could equate to an opportunity for Foolish investors and all three companies could prove to be well-worth buying right now. Here’s why.
When it comes to Tullow, its major appeal is its superb growth potential. Certainly, its track record is hugely volatile and a lower oil price will inevitably mean that, moving forward, its bottom-line forecasts could come under pressure. However, with a price to earnings growth (PEG) ratio of just 0.3, there seems to be a considerable safety margin built in to the current share price.
The problem for investors, though, is that sentiment in Tullow is extremely weak. In fact, even before the recent oil price collapse, shares in Tullow had delivered disappointing performance. With super-strong growth set to come through, this could easily change and, as such, Tullow could be a star, albeit volatile, buy at present price levels.
There’s been something of an outcry in the media in recent days over the pay packet of BG’s new CEO, Helge Lund. Poached from Norwegian rival Statoil, Lund replaces Chris Finlayson, who has resigned after just a year in charge of BG.
The new man will earn up to £14 million per year depending upon the company’s performance and, if he can turn around a disappointing period for the company, will be well-worth it. Indeed, BG’s share price has fallen by 18% in 2014 and it has delivered numerous profit warnings and production disappointments in recent years.
With shares in the company trading on a PEG ratio of 15.2, they seem to offer growth at a reasonable price and, with a new man at the helm, could be worth buying.
Trading on a price to earnings (P/E) ratio of just 6.8, Premier Oil screams value. Furthermore, with the company’s bottom line due to rise by a whopping 39% in the current year, it offer superb growth prospects, too.
Certainly, a weak oil price could put the company’s growth prospects under pressure but, as with Tullow Oil, there seems to be a large margin of safety already priced in to shares. Furthermore, with a payout ratio of just 12%, there seems to be vast scope for a dividend increase, which could significantly boost Premier Oil’s current 1.8% yield.
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Tullow Oil. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.