Although oil stocks roared last year, analysts believe there's still ample room for most of them them to climb in 2008. See what they like, sector by sector.
By Steve Hargreaves, CNNMoney.com staff writer January 14 2008: 2:30 PM EST
CNN's Ali Velshi explains what's behind crude's triple-digit gusher.
NEW YORK (CNNMoney.com) -- It's not too late for investors to get in on the oil boom in 2008, analysts say, even with the near 30 percent runup in oil company stocks last year.
From companies that pull oil out of the ground, to the ones that turn it into gasoline, to the specialists that keep the wells flowing, the oil sector breaks down into lots of categories. And some categories are expected to do much better than others in 2008.
Experts generally expect nearly all oil stock sectors to do well in 2008 - although not as well as in 2007. Natural gas
Nearly everyone thinks this sector, which did well in 2007, will continue to do great in 2008. "Gas is where the growth is going to be," said Crower. Gas prices "could easily double this year. It's going to be huge."
The enthusiasm comes from the fact that natural gas prices are cheap compared to oil. A barrel of oil usually costs about 6 to 9 times more than 1,000 cubic feet of natural gas. But now oil is about 12 times more expensive.
"Gas is selling at a steep discount," said Jack Aydin, an oil analyst at Keybanc Capital Markets. For gas stocks, Aydin likes Cabot (COG), Range Resources (RRC), or Quicksilver (KWK), simply because they get nearly all their revenue from natural gas.
Of the big natural gas companies - Chesapeake (CHK, Fortune 500), EOG Resources (EOG) and XTO Energy (XTO, Fortune 500) - Chesapeake shares are trading at roughly 2.5 times estimated sales for the next four quarters, cheaper than EOG's 4.5 and XTO's 4.4.
Gheit also likes the gas sector, although he says it has nothing to do with price. He points to the fact that natural gas is a cleaner burning fuel - likely more desired in a world concerned with global warming.
He also notes that most natural gas is produced in North America. "We don't have to send kids to die to protect it," he said.
AZZ Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
