Exxon Mobil and Contango Oil & Gas: Opportunity Knocks for these Favored Energy Stocks
January 26th, 2010 - Posted in energy policyExxon Mobil’s (XOM) investment thesis seems obvious. With their takeover plans for XTO Energy (XTO) it appears we have a very rare chance to buy the shares of the cash-rich, dividend-yielding “King of the Diversified Energy Companies.”
With it’s forward PE nearing 11, a 2.5% yield, priced at close to 1X sales, over $30 billion in operating cash and $6.6 billion in levered free cash flow (TTM), XOM appears to be a cheap long-term investment.
XOM might be on its way to testing its 52-week low, so now might be a prudent time to average in. Remember, with oil above $72 a barrel, XOM keeps making a rich profit. If it acquires XTO, they have the potential to make even more money on future natural gas production and price hikes.
Contango Oil & Gas (MCF) engages in the exploration, development, production, and acquisition of oil and natural gas properties primarily offshore in the Gulf of Mexico.
It is a tiny speck on the energy horizon compared to Exxon Mobil with its current market cap of around $820 million. Yet it appears to be the right small cap company in a promising position at the right time.
With its forward P/E of 9, little debt, management/insiders owning around 35% of the company’s shares, almost $65 million in total cash (MRQ), a 25% profit margin (TTM) and an operating margin (TTM) of over 41%, Contango is a compelling and promising speculative stock. (more)
