Drill For Growth With These 3 Oil Stocks

Oil stocks are finally out of the doghouse.

Earnings for many of the exploration and production companies plunged as crude fell from its record highs last year of $147.27 and as natural gas prices sank to 7-year lows. Drilling was silenced.

But in recent weeks, the oil stocks have been showing new life and analysts have been raising estimates. While many exploration companies are set to report quarterly earnings shortly, and estimates have been rising along with crude prices, the real action appears to be in the next few quarters, in 2010.

With the recovery underway, many are expecting oil demand to improve. Both OPEC and the International Energy Agency (IEA) have raised 2010 worldwide demand estimates in the last few weeks.

Additionally, the Chinese recently announced 1 million car sales in a single month, 78% growth over a year ago, which will likely lead to increasing Chinese oil consumption.

How do you cash in on future energy demand?

These 3 explorers are expected to show huge growth in 2010.

3 Oil Stocks with Growth in All the Right Places

Cimarex Energy (XEC) explores in the United States in the Mid-Continent, the Permian Basin, and the Gulf Coast. Even with lower crude prices in the first half of the year, 2009 hasn't been a total bust. Quarterly estimates continue to rise.

Earnings are also expected to grow by 116.79% in 2010 with the Zacks Consensus Estimate at $4.27 per share compared to 2009 expected earnings of $1.97.

Currently, Cimarex is trading with a forward P/E of 23.57, which is historically expensive. But looking forward, it's trading at just 11x 2010 earnings.

Cimarex is a Zacks #3 Rank (hold) stock.

Gulfport Energy Corporation (GPOR) is a small U.S. explorer with properties in the Louisiana Gulf Coast and the Permian Basin in West Texas. It also has a 25% position in the Grizzly Oil Sands project in Alberta and is participating in wells in the Bakken play in the Williston Basin in North Dakota.

The 2009 Zacks Consensus Estimate is up 2 cents in the last 60 days to 47 cents. But it is really in 2010 where earnings growth will soar. Analysts expect an increase of 76.06% to 83 cents.

Gulfport has a history of meeting or surprising on estimates over the last four quarters. Its beats have been big, averaging 195.71%.

Gulfport is trading at 18.5x forward 2009 earnings. But looking forward to 2010, its P/E drops to just 10.96.

Gulfport Energy is a Zacks #2 Rank (buy) stock.

Rosetta Resources Inc. (ROSE) explores in South Texas, the Rocky Mountains and the Sacramento Basin of California.

The 2009 Zacks Consensus Estimate rose 1 cent in just the last week to 42 cents. But, once again, the analysts are bullish on the company's prospects in 2010. Earnings are expected to grow 133.67% to 98 cents for 2010.

Currently, Rosetta Resources looks pricey, with a forward P/E of 40.3. Looking forward, based on 2010 projected earnings, it is trading at a more reasonable 16.9x earnings.

Rosetta Resources is a Zacks #3 (hold) stock.

See the 2-year chart of all three companies:

The Future Looks Bright for Oil

Every time you look forward there is always a danger that the assumptions you use for your analysis will be wrong.

However, with crude at 52-week highs and companies in numerous industries declaring that the recession is over, analysts are seeing better days ahead for many of the exploration companies. Earnings, over the last few quarters, have been trending higher.

Oil stocks, which had been lagging since the March bottom, could finally be returning to the spotlight.

Ways to Find Oil Stocks

Zacks Custom Screener - This is the place to start to create your own screens where you can search by sector, valuation, dividend yields and a host of other criteria.

Research Wizard - This sophisticated tool will allow you to search for a detailed list of companies using even more specific criteria, including Zacks Rank and earnings history.

Read the full analyst report on GPOR

Read the full analyst report on ROSE

Read the full analyst report on XEC