Oil is getting its swagger back.

Since its low in February, the price of oil has risen more than 78%.

Unfortunately, the latest uptick was too little, too late for several energy companies that have filed for bankruptcy recently, including major energy producers SandRidge Energy, Linn Energy, Penn Virginia, and Breitburn Energy Partners.

[ad#Google Adsense 336×280-IA]Texas law firm Haynes and Boone – which specializes in the oil sector – reports 77 North American oil and gas companies have filed since the end of 2014.

Overall, they’re asking the U.S. bankruptcy court to help to them restructure nearly $52 billion in debt on their books.

These companies couldn’t be saved by the recent spike in the oil price… and I believe more companies will join them.

Too much debt remains at the current level of profitability.

But the good news today is that there is a group of energy companies that aren’t at risk. And if oil prices keep rising, these companies could continue to move much higher…

Oil-service companies help producers find and pull the commodities out of the ground. These companies benefit when oil prices are rising and suffer when they’re falling.

The SPDR S&P Oil & Gas Equipment & Services Fund (XES), which holds a basket of 33 stocks from the sector, fell 73% from its peak in June 2014 to its bottom in February. The fund has risen 33% since then as oil has rallied, but it’s still down 65% from that peak.

Within the oil-service sector, one subset has maintained sterling balance sheets during this recent difficult period: the companies that either have no debt or generate more than enough earnings before interest, taxes, depreciation, and amortization (EBITDA) to service their debt.

Here are the names of five oil-service stocks that will do well even if the price of oil weakens again in the coming weeks…

CaptureYou can see these stocks have all climbed double digits since oil bottomed… but they can still run even higher. You see, the rig count hasn’t started to increase yet.

Oil-service company Baker Hughes (BHI) reports the number of active rigs each week. Active drilling rigs consume products and services produced by the oil-service industry. It is a leading indicator of the health of the space.

The biggest problem facing these companies is that the number of rigs drilling for oil in the U.S. has fallen from 1,925 in November 2014 to just 406 today. That’s a 79% decline.

When the rig count is falling, there are fewer rigs for the service companies to work on. But once that number starts to turn around and increase, business will pick up. When that happens, we’ll want to buy these companies.

I recommend you put these stocks on your watch list today. When the rig count turns upward, we’ll revisit the oil-service sector.

Good investing,

Brian Weepie


Source: Growth Stock Wire