5 Best Oil Stocks For 2014

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Hercules Offshore (NASDAQ: HERO  ) dropped as much as 11% today after a rig standing over a ruptured well collapsed.

So what: A fire broke out on one of Hercules's rigs yesterday, and there are now reports that the rig has collapsed and the fire has yet to be contained. All workers were evacuated and there's no evidence yet of oil escaping from the natural gas well, but the company will be on the hook for massive repair costs at the very least.

Now what: This isn't the BP spill of 2010 for a variety of reasons, but it's still not good for Hercules or the industry. It appears, for now, that it's primarily natural gas that's escaping from the well and it's in shallow water so it will be easier to work on than BP's Deepwater Horizon disaster was, limiting both environmental and financial impact. This could be a drag for the company and is definitely a black eye, but it could present an opportunity to buy because it doesn't appear that it will affect earnings potential in years to come, which is the biggest reason to own the stock.

5 Best Oil Stocks For 2014: Precision Drilling Corp (PDS)

Precision Drilling Corporation (Precision) is a provider of contract drilling and completion and production services primarily to oil and natural gas exploration and production companies in Canada and the United States. The Company operates in two segments: Contract Drilling Services, and Completion and Production Services. In Canada, the Contract Drilling Services segment includes land drilling services, directional drilling services, procurement and distribution of oilfield supplies and the manufacture and refurbishment of drilling and service rig equipment, and the Completion and Production Services segment includes service rigs for well completion and workover services, snubbing services, camp and catering services, wastewater treatment services and the rental of oilfield surface equipment, tubulars, well control equipment and wellsite accommodations. Advisors' Opinion:

• [By Louis Navellier]

  Dahlman Rose, an investment bank specializing in natural resources, upgraded the oil services industry in November 2012; one of the prime recipients of this upgrade was Precision Drilling, Canada's largest oilfield services company. Dahlman Rose expects North American exploration and production to increase by 11% in 2013 to $334 billion, led by a big increase from natural gas. The investment banker believes land drillers like Precision are selling at a historically low multiple of 1.1 times tangible book value compared to the historical norm of two times tangible book value. Heading into 2013, Precision's stock's dropped a significant amount and sits at one of its lowest levels in the past two years. Despite reduced demand for its services in 2012, CEO Kevin Neveu pointed out in October that, "PDS is seeing increased long-term contracts for upgraded and new rigs." Rising natural gas prices should increase the industry's rig utilization rate to around 85%, naturally increasing Precision's revenues and profits. This could be an easy double in 2013. 

5 Best Oil Stocks For 2014: Phillips 66 (PSX)

Phillips 66 is a holding company. The Company is engaged in producing natural gas liquids (NGL) and petrochemicals. The Company operates in three segments: the Refining and Marketing (R&M) segment, the Midstream segment and the Chemicals segment. The Refining and Marketing (R&M) segment purchases, refines, markets and transports crude oil and petroleum products, mainly in the United States, Europe and Asia, and also engages in power generation activities. The Midstream segment gathers, processes, transports and markets natural gas, and fractionates and markets NGL, predominantly in the United States. The Chemicals segment manufactures and markets petrochemicals and plastics on a worldwide basis. The Company�� operations encompass 15 refineries with a gross crude oil capacity of 2.8 million barrels per day, 10,000 branded marketing outlets and 7.2 billion cubic feet per day of gross natural gas processing capacity.

R&M

The Company�� R&M segment primarily refines crude oil and other feedstocks into petroleum products (such as gasolines, distillates and aviation fuels); buys, sells and transports crude oil; and buys, transports, distributes and markets petroleum products. This segment also engages in power generation activities. R&M has operations in the United States, Europe and Asia.

The Company�� Bayway Refinery is located on the New York Harbor in Linden, New Jersey. The refinery produces a high percentage of transportation fuels, such as gasoline, diesel and jet fuel, as well as petrochemical feedstocks, residual fuel oil and home heating oil. Its Trainer Refinery is located on the Delaware River in Trainer, Pennsylvania. Refinery facilities include fluid catalytic cracking units, hydrodesulfurization units, a reformer and a hydrocracker. The Alliance Refinery is located on the Mississippi River in Belle Chasse, Louisiana. The single-train facility includes fluid catalytic cracking units, hydrodesulfurization units and a reformer and aromatics unit. Alli! ance produces a percentage of transportation fuels, such as gasoline, diesel and jet fuel. Other products include petrochemical feedstocks, home heating oil and anode petroleum coke.

The Lake Charles Refinery is located in Westlake, Louisiana. Its facilities include crude distillation, fluid catalytic cracker, hydrocracker, delayed coker and hydrodesulfurization units. The refinery produces a percentage of transportation fuels, such as gasoline, off-road diesel and jet fuel, along with home heating oil. It owns a 50% interest in Excel Paralubes, a joint venture which owns a hydrocracked lubricant base oil manufacturing plant located adjacent to the Lake Charles Refinery. The Sweeny Refinery is located in Old Ocean, Texas, approximately 65 miles southwest of Houston. Refinery facilities include fluid catalytic cracking, delayed coking, alkylation, a continuous regeneration reformer and hydrodesulfurization units. It produces a percentage of transportation fuels, such as gasoline, diesel and jet fuel. Other products include petrochemical feedstocks, home heating oil and coke.

The Company�� Merey Sweeny, L.P. (MSLP) owns a delayed coker and related facilities at the Sweeny Refinery. Fuel-grade petroleum coke is produced as a by-product and becomes the property of MSLP. The Company owns 50% operating interest in Sweeny Cogeneration, a joint venture, which owns a simple cycle, cogeneration power plant located adjacent to the Sweeny Refinery. The plant generates electricity and provides process steam to the refinery, and it also provides merchant power into the Texas market.

The Company�� Wood River Refinery is located in Roxana, Illinois, about 15 miles northeast of St. Louis, Missouri, at the convergence of the Mississippi and Missouri rivers. Operations include three distilling units, two fluid catalytic cracking units, hydrocracking, coking, reforming, hydrotreating and sulfur recovery. The refinery produces a percentage of transportation fuels, such as gasoline,! diesel a! nd jet fuel. Other products include petrochemical feedstocks, asphalt and coke. Its Borger Refinery is located in Borger, Texas, in the Texas Panhandle, approximately 50 miles north of Amarillo. The refinery facilities consist of coking, fluid catalytic cracking, hydrodesulfurization and naphtha reforming, in addition to a 45,000-barrels-per-day NGL fractionation facility. It produces a percentage of transportation fuels, such as gasoline, diesel and jet fuel, as well as coke, NGL and solvents.

The Ponca City Refinery is located in Ponca City, Oklahoma. It is a high-conversion facility, which includes fluid catalytic cracking, delayed coking and hydrodesulfurization units. It produces a range of products, including gasoline, diesel, jet fuel, liquefied petroleum gas (LPG) and anode-grade petroleum coke. The Billings Refinery is located in Billings, Montana. Its facilities include fluid catalytic cracking and hydrodesulfurization units. The Ferndale Refinery is located on Puget Sound in Ferndale, Washington, approximately 20 miles south of the United States-Canada border. Facilities include a fluid catalytic cracker, an alkylation unit, a diesel hydrotreater and an S-Zorb unit. The Los Angeles Refinery consists of two linked facilities located about five miles apart in Carson and Wilmington, California. The San Francisco Refinery consists of two facilities linked by a 200-mile pipeline. The Santa Maria facility is located in Arroyo Grande, California, about 200 miles south of San Francisco.

As of December 31, 2011, the Company marketed gasoline, diesel and aviation fuel through approximately 8,250 marketer-owned or -supplied outlets in 49 states. At December 31, 2011, its wholesale operations utilized a network of marketers operating approximately 6,875 outlets that provided refined product offtake from its refineries. In addition to automotive gasoline and diesel, it produces and markets aviation gasoline, which is used by smaller piston engine aircrafts. As December 31, 2011,! aviation! gasoline and jet fuel were sold through dealers and independent marketers at approximately 875 Phillips 66-branded locations in the United States.

The Company manufactures and sells automotive, commercial and industrial lubricants, which are marketed worldwide under the Phillips 66, Conoco, 76 and Kendall brands, as well as other private label brands. It also manufactures Group II and import Group III base oils and market both globally under the respective brand names Pure Performance and Ultra-S. It manufactures and markets graphite and anode-grade petroleum cokes in the United States and Europe for use in the global steel and aluminum industries. It also manufacture and market polypropylene to North America under the COPYLENE brand name. Its ThruPlus Delayed Coker Technology, a process for upgrading heavy oil into higher value, light hydrocarbon liquids, was sold in June 2011. In October 2011, it sold Seaway Products Pipeline Company to DCP Midstream. In December 2011, the Company sold its 16.55% interest in Colonial Pipeline Company and its 50% interest in Seaway Crude Pipeline Company. The Company manufactures and sells a variety of specialty products, including pipeline flow improvers and anode material for high-power lithium-ion batteries. Its specialty products are marketed under the LiquidPower and CPreme brand names.

The Company owns four refineries outside the United States: the Humber Refinery, Whitegate Refinery, Melaka Refinery and Wilhelmshaven Refinery. The Humber Refinery is located on the east coast of England in North Lincolnshire, United Kingdom. It is an integrated refinery, which produces a high percentage of transportation fuels, such as gasoline and diesel. Humber�� facilities encompass fluid catalytic cracking, thermal cracking and coking. The refinery has two coking units with associated calcining plants, which upgrade the heaviest part of the crude barrel and imported feedstocks into light oil products and graphite and anode petroleum cokes.

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Th! e Whitegate Refinery is located in Cork, Ireland. The refinery primarily produces transportation fuels, such as gasoline, diesel and fuel oil, which are distributed to the inland market, as well as being exported to Europe and the United States. It also operate a crude oil and products storage complex consisting of 7.5 million barrels of storage capacity and an offshore mooring buoy, located in Bantry Bay, about 80 miles southwest of the refinery in southern Cork County.

The Mineraloelraffinerie Oberrhein GmbH (MiRO) Refinery, located on the Rhine River in Karlsruhe in southwest Germany, is a joint venture in which it owns an 18.75% interest. Facilities include three crude unit trains, fluid catalytic cracking, petroleum coking and calcining, hydrodesulfurization units, reformers, isomerization and aromatics recovery units, ethyl tert-butyl ether (ETBE) and alkylation units. MiRO produces a percentage of transportation fuels, such as gasoline and diesel. Other products include petrochemical feedstocks, home heating oil, bitumen, and anode- and fuel-grade petroleum coke. The Wilhelmshaven Refinery is located in the northern state of Lower Saxony in Germany, and has a 260,000 barrels-per-day crude oil processing capacity.

As of December 31, 2011, the Company had approximately 1,430 marketing outlets in its European operations, of which approximately 900 were Company-owned and 330 were dealer-owned. It also held brand-licensing agreements with approximately 200 sites. Through its joint venture operations in Switzerland, it also has interests in 250 additional sites.

Midstream

The Midstream segment purchases raw natural gas from producers, including ConocoPhillips, and gathers natural gas through pipeline gathering systems. Its Midstream segment is primarily conducted through its 50% investment in DCP Midstream. DCP Midstream also owns or operates 12 NGL fractionation plants, along with propane terminal facilities and NGL pipeline assets. It has a 25% inte! rest in R! ockies Express Pipeline LLC (REX).

Chemicals

The Chemicals segment consists of its 50% investment in CPChem. As of December 31, 2011, CPChem owned or had joint-venture interests in 38 manufacturing facilities. CPChem�� business is structured around two primary operating segments: Olefins & Polyolefins (O&P) and Specialties, Aromatics & Styrenics (SA&S). The O&P segment produces and markets ethylene, propylene, and other olefin products, which are primarily consumed within CPChem for the production of polyethylene, normal alpha olefins, polypropylene and polyethylene pipe. The SA&S segment manufactures and markets aromatics products, such as benzene, styrene, paraxylene and cyclohexane, as well as polystyrene and styrene-butadiene copolymers.

Advisors' Opinion:

• [By Joel South]

  Phillips 66 (NYSE: PSX  ) has been nothing short of spectacular since splitting off fromConocoPhillips (NYSE: COP  ) earlier this year. The refiner has made our list of top performing energy stocks in 2012 with a stock price appreciation of 60% year to date. While the sector as a whole was buoyed by access to cheap WTI oil in North America, Phillips 66 stands out as a long-term winner by using excess cash flows to build out its successful chemicals and midstream division. Shareholders have been adequately rewarded while the company increased its dividend twice this past year, in addition to enacting a lofty $2 billion share repurchasing program. 

  There are many different ways to play the energy sector, and our analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations, and poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out our special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. 

5 Best Performing Stocks To Buy For 2014: EXCO Resources NL(XCO)

EXCO Resources, Inc., an independent oil and natural gas company, engages in the exploration, exploitation, development, and production of onshore North American oil and natural gas properties with a focus on shale resource plays. The company holds interests in various projects located in East Texas, North Louisiana, Appalachia, and the Permian Basin in west Texas. As of December 31, 2010, it had proved reserves of approximately 1.5 trillion cubic feet equivalent; and operated 7,276 wells. The company was founded in 1955 and is based in Dallas, Texas.

Advisors' Opinion:

• [By Quickel]

  Exco Resources, Inc. (XCO) is trading around $10.70. Exco is an onshore North American oil and natural gas company, and is based in New York. These shares have traded in a range between $9.33 to $21.04 in th e last 52 weeks. XCO is estimated to earn about 78 cents per share in 2011. XCO pays a dividend of 16 cents per share which is equivalent to a 1.5% yield. The book value is stated at $7.69. In 2011, Barclays Capital set a price target of $23 per share for XCO.

5 Best Oil Stocks For 2014: Sunoco Inc.(SUN)

Sunoco, Inc., through its subsidiaries, refines and markets petroleum products in the United States. Its Logistics segment operates refined product and crude oil pipelines and terminals; and acquires and markets crude oil and refined products. As of December 31, 2011, this segment owned and operated approximately 5,400 miles of crude oil pipelines and approximately 2,500 miles of refined product pipelines. It also operates 42 active terminals that receive refined products from pipelines and distribute them to third parties. The company?s Retail Marketing segment engages in the retail sale of gasoline and middle distillates; and operation of convenience stores. This segment operates outlets primarily in Connecticut, Florida, Maryland, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, and Virginia. Its Refining and Supply segment offers petroleum products, including gasoline and residual fuel oil, as well as middle distillates, such as jet fuel, heating oil , and diesel fuel; and commodity petrochemicals comprising propylene-propane, benzene, and cumene. This segment offers its products to wholesale and industrial customers. The company was founded in 1886 and is based in Philadelphia, Pennsylvania.

5 Best Oil Stocks For 2014: Occidental Petroleum Corporation(OXY)

Occidental Petroleum Corporation, together with its subsidiaries, operates as an oil and gas exploration and production company primarily in the United States. The company operates in three segments: Oil and Gas; Chemical; and Midstream, Marketing, and Other. The Oil and Gas segment explores for, develops, produces, and markets crude oil, natural gas liquids, and condensate and natural gas. Its domestic oil and gas operations are located in Texas, New Mexico, California, Kansas, Oklahoma, Utah, Colorado, North Dakota, and West Virginia; and international oil and gas operations are located in Bahrain, Bolivia, Colombia, Iraq, Libya, Oman, Qatar, the United Arab Emirates, and Yemen. As of December 31, 2010, this segment had proved reserves of approximately 3,363 million barrels of oil equivalent. The Chemical segment manufactures and markets basic chemicals, including chlorine, caustic soda, chlorinated organics, potassium chemicals, and ethylene dichloride products; vinyls, such as vinyl chloride monomer and polyvinyl chloride; and other chemicals comprising chlorinated isocyanurates, resorcinol, sodium silicates, and calcium chloride products. The Midstream, Marketing, and Other segment gathers, treats, processes, transports, stores, purchases, and markets crude oil that includes natural gas liquids and condensate, as well as natural gas and carbon dioxide. This segment also involves in the power generation; and trades around its assets comprising pipelines and storage capacity, as well as oil and gas, other commodities, and commodity-related securities. Occidental Petroleum Corporation was founded in 1920 and is based in Los Angeles, California.

Advisors' Opinion:

• [By Steven Goldberg]

  Occidental Petroleum (OXY, $86.66, 3.0%) finds most of its oil and gas in Texas and California, largely through cost-effective techniques of drilling in proven oilfields. The company, which also operates abroad, has a strong balance sheet that lets it take advantage of distressed properties. Unlike many major oil and gas companies, Oxy Pete isn't burdened by a low-profit refining and marketing business (that is, gasoline stations). The stock changes hands at 12 times estimated earnings for the next 12 months. Oxy says it will probably buy back shares in the near future.

• [By Jonas Elmerraji]

  The past quarter has been pretty so-so for shareholders in Occidental Petroleum (OXY). Despite a strong start to 2013, shares of the $70 billion oil and gas exploration firm have stalled out for the last few months, churning sideways since May.

  But that hasn't kept OXY off of fund managers' buy lists. All told, institutions picked up more than 3 million shares of the firm last quarter, upping their stakes by more than 15%. So does it make sense to follow that lead?

   

  Well, there's no question that OXY goes against the grain when it comes to finding growth in the energy sector. Unlike the bigger-names in the field, Occidental is a pure play on exploration and production, the more lucrative side of the oil and gas business. The firm doesn't own refinery assets, and it doesn't own gas stations. But in many ways, that's a good thing -- refining and retail are lower-margin components of the business for integrated supermajors. With oil prices quietly creeping their way higher this year, it's a mistake to count OXY out.

  Because OXY doesn't own the downstream assets that similarly-sized firms do, it's better able to scale down production when prices are less favorable -- that price elasticity means that OXY can react quickly to market conditions. The firm's financial wherewithal also means that investors can lay claim to a 2.9% dividend yield right now. OXY isn't the biggest or most visible name in the energy sector, but as oil and gas prices remain on the high end of their historic range, it makes sense to own it.

• [By Gordon Wilcox]

  Occidental Petroleum (NYSE: OXY) Occidental, the fourth-largest U.S. oil company by market value, announced earlier this year it would reduce its Bakken Shale footprint due to high operating costs. However, the California-based company emphasized Bakken is still part of its long-term plans. Additionally, it should be noted Occidental said it would shift resources out of the Bakken to other U.S. shale plays, such as the Monterey Shale and the Permian Basin in West Texas and New Mexico.

  As is the case with most oil equities, there are risks that must be acknowledged with Occidental. First, while the company does not drill offshore, it does operate in some politically volatile places, including Libya. Second, the company is the dominant producer in the Monterey Shale, but California has been slow to approve new drilling permits there. That could weight on Occidental’s output numbers over the medium-term.

  On the bright side, Occidental does compensate investors for their patience. The dividend has more than quadrupled since 2003.

• [By Paul]

  Occidental Petroleum (OXY-N75.722.463.36%) is an integrated oil-and-gas company, with operations in the U.S.

  The Los Angeles-based company has strong operating momentum, having grown 12-month sales 27 per cent and net income 76 per cent. Its stock has been a top performer over a three-year span, having gained 12 per cent a year, on average. Occidental has a market capitalization of $78-billion. It receives positive rankings from 84 per cent of researchers. It is scheduled to report fourth-quarter results on Jan. 26. Analysts forecast a 17 per cent year-over-year rise in adjusted earnings and a 7.6 per cent gain in sales. Occidental has an average earnings surprise rate of 6.6 per cent. It beat the consensus expectation by 8.2 per cent last quarter.

  Like Chevron and El Paso, what is most attractive about Occidental is its relative value amid strong secular growth. Its stock sells for a forward earnings multiple of 13 and a book value multiple of 2.5, 28 per cent and 43 per cent peer discounts. Its PEG ratio, the stock's P/E divided by researcher's long-term growth forecast, of 0.3 represents a 70 per cent discount to estimated fair value, a compelling bargain. Occidental pays a quarterly dividend of 38 cents, converting to an annual yield of 1.6 per cent. It has grown the payout 16 per cent and 18 per cent annually, on average, respectively, over three- and five-year spans. JPMorgan, optimistic about Occidental's long-term trajectory, is skeptical of the recent rally.

  Bullish Scenario: Goldman Sachs has a target of $111, suggesting a 13 per cent advance.

  Bearish Scenario: JPMorgan has a target of $90, implying that the stock will drop 8 per cent.