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With Brent Crude Oil This Low, Should You Buy BP plc, Premier Oil plc And Plexus Holdings plc?

With the price of Brent crude oil back below $45 per barrel, it is hardly surprising that investors are taking flight and heading for the exit at listed oil producers and the groups that service them.

Indeed, with oil prices at these levels and the focus moving from Greece to concerns about the slowdown in the Chinese economy, this is a problem that could well dwarf the issues that have been rumbling on for the last three years in the Eurozone.

However, for the contrarians amongst us, it can pay to go against the crowd or the herd mentality of investors, and buy assets or sectors that are currently out of favour with the market.

It is essential to manage one’s risk here, not placing the ‘farm’ on one stock – as we have seen recently, stocks in the oil and mining sectors have been punished. Often, it is more advisable to spread one’s risk. With that in mind, I’ve highlighted three stocks of interest that I believe have the potential to recover:

Shaping up for a recovery?

With a forecast dividend yield of almost 7%, BP (LSE: BP) is looking very interesting at current prices. True, the dividend is expected to just about be covered by earnings this year… however, this is expected to change for the better heading into 2016.

Additionally, the company reached an agreement to settle all US federal and state claims arising from the tragic Deepwater Horizon accident in the Gulf of Mexico. This effectively removes any uncertainty that was in the market going forward.

One of the key advantages over the smaller oil explorers and producers is the fact that they are much more diversified, meaning that the downstream or refining side of the business has taken up the slack with improved profits and margins from the oil production or upstream business line.

Not for widows and orphans

With the apparent peak just above 500 pence per share in 2011, investors in Premier Oil (LSE: PMO) will be sick as a dog with the share price closing below 100 pence on Friday. The share price has not been this low since 2003.

However, this could well create an opportunity for those prepared to take a risk. Like other oil producers, management have cut costs whilst moving forward with interesting exploration plans. Indeed, Premier has operations in the Sea Lion field in the Falklands; the company was also awarded two exploration blocks in the Gulf of Mexico in a joint venture with Talos Energy (operator) and Sierra Oil & Gas.

What I find most appealing about this stock is that it is trading around its tangible book value. This represents the hard assets of the company, i.e. the amount of money that shareholders would receive for each share owned if the company were to liquidate its operations. I think at these prices, investors could well see an opportunistic bid from a bigger peer interested in owning some quality assets.

Keeping a firm grip

Last up is Plexus Holdings (LSE: POS). Based in the UK with a sub £200 million market cap, the company is engaged in marketing a patented method of engineering for oil and gas field wellheads and connectors, named POS-GRIP, which involves in deforming one tubular member against another within the elastic range to effect gripping and sealing.

Operating globally either on its own via offices in Aberdeen, Malaysia and Singapore or via joint ventures with large oil service operators.

Management have recently announced that the launch date for the new Python Subsea Wellhead — formally known as the HGSS, the development of which was supported by large industry players such as BGRoyal Dutch Shell, Maersk, TOTAL and Tullow Oil — will be 8 September. This will mean that Plexus will facilitate entry into the global subsea market and will considerably expand the addressable market for the company.

The shares don’t look like a steal, currently exchanging hands at 24 times the 12-month forecast earnings; however, despite the depressed market, the company has the potential to grow sales rapidly as its technology takes hold.

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Dave Sullivan has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.