Refiners are no better off: Valero Energy Corp. (NYSE: VLO) is down -7.7% in the past month, Marathon Petroleum Corp. (NYSE: MPC) is down about -9.8%, while Tesoro Corp. (NYSE: TSO) is up a bare 0.4%. Refiners have been surviving off the wide differential between WTI and Brent crudes and as the differential narrows, profits are harder to come by.

For the integrated oil companies, the price of crude has been the determining factor in a company’s profit picture: the higher the price, the bigger the profit. That makes sense. For the services company, higher prices typically mean more work as producers want to get more oil to sell.

Because crude prices are at a seven-month low now, we thought it would be interesting to look for value in some of the big oil stocks. After all, low crude prices mean share sell-offs, so there ought to be some value left on the table.

With the exceptions of Exxon and Chevron, all the companies we looked at have implied gains exceeding 30% if analysts have gotten target prices right. That’s some pretty good value, but we thought we’d try to handicap the race a bit more closely.

Exxon Mobil Corp. (NYSE: XOM) traded at $82.21 and has a market value of $383 billion. The consensus target price from Thomson Reuters is $94.53 and the 52-week range is $67.03 to $87.94. Exxon has a dividend yield of 2.8%. The implied upside to the consensus target is 15%, but we would note that the target is above the 52-week high.

Chevron Corp. (NYSE: CVX) traded at $99.71 and has a market value of $196 billion. The consensus target price from Thomson Reuters is $124.88 and the 52-week range is $86.68 to $112.28. Chevron has a dividend yield of 3.7%. The implied upside to the consensus target is 25%, but we would note again that the target is above the 52-week high.

BP plc (NYSE: BP) traded at $38.26 and has a market value of $121 billion. The consensus target price from Thomson Reuters is $53.25 and the 52-week range is $33.62 to $48.34. BP has a dividend yield of 5.2%. The implied upside to the consensus target is 39%, but we would note again that the target is above the 52-week high.

Schlumberger Ltd. (NYSE: SLB) traded at $67.47 and has a market value of $89 billion. The consensus target price from Thomson Reuters is $89.20 and the 52-week range is $54.79 to $95.53. Schlumberger has a dividend yield of 1.7%. The implied upside to the consensus target is 32%, and the target price is lower than the 52-week high.

Halliburton Co. (NYSE: HAL) traded at $31.40 and has a market value of about $29 billion. The consensus target price from Thomson Reuters is $47.28 and the 52-week range is $27.21 to $57.77. Halliburton has a dividend yield of 1.2%. The implied upside to the consensus target is 51%, and again the target price is lower than the 52-week high.

Baker Hughes Inc. (NYSE: BHI) traded at $42.20 and has a market value of about $18 billion. The consensus target price from Thomson Reuters is $56.33 and the 52-week range is $39.40 to $81.00. Baker Hughes has a dividend yield of 1.5%. The implied upside to the consensus target is 33%, and again the target price is well below the 52-week high.

Valero Energy Co. (NYSE: VLO) traded at $22.17 and has a market value of about $12 billion. The consensus target price from Thomson Reuters is $30.15 and the 52-week range is $16.40 to $28.68. Valero has a dividend yield of 2.8%. The implied upside to the consensus target is 36%, and again the target price is above the 52-week high.

Marathon Petroleum Corp. (NYSE: MPC) traded at $36.38 and has a market value of about $12 billion. The consensus target price from Thomson Reuters is $52.50 and the 52-week range is $26.35 to $47.43. Marathon has a dividend yield of 2.9%. The implied upside to the consensus target is 44%, and again the target price is above the 52-week high.

Tesoro Corp. (NYSE: TSO) traded at $23.49 and has a market value of about $3 billion. The consensus target price from Thomson Reuters is $31.36 and the 52-week range is $17.43 to $30.15. Tesoro does not pay a dividend. The implied upside to the consensus target is 34%, and again the target price is above the 52-week high.

For comparison, The SPDR S&P Oil & Gas Exploration and Production ETF (AMEX: XOP) traded at $50.45 in a 52-week range of $37.67 to $65.58. That’s about 30% below the 52-week high. The Market Vectors Oil Services ETF (AMEX: OIH) traded at $37.47 in a 52-week range of $35.32 to $45.14, again about 30% below the 52-week high.

Target prices for the large integrated oil companies are above 52-week highs, as are target prices for the refiners. Unless the price of crude rises sharply, the targets are out of reach for the integrated companies. For refiners, they’re whipsawed if prices for WTI open a bigger gap versus Brent or if WTI rise and Brent falls. No chance at those targets either way.

Targets for the services companies are lower than 52-week highs, which improves the chances of hitting those targets. Schlumberger, the largest of the services companies, and Baker Hughes both look appear to have the best chance to boost their share prices.

Paul Ausick

The company noted that the U.S. Rig Count grew by 12 to 1986 rigs, broken down by oil rigs rising by 10 rigs and to 1382 rigs and even gas rigs were up 2 at 600 rigs.  The Rig Count is now up 156 rigs from last year at 1830, with oil rigs up 428 and gas rigs down 266.  The U.S. Offshore rig count was 47, which is up 2 from last week and up 16 year over year.

The rig count in Canada grew by 3 to 123 rigs, broken down as oil rigs rising by 6 to 76 rigs and the gas rigs were down 3 rigs to a total of 47 rigs. The Canadian rig count is down 20 rigs from last year at 143 rigs, broken down by oil rigs up 3 rigs and gas rigs down 23.

Baker Hughes is still way down from its peak with a 50% sell-off from its 52-week high of $81.00, but shares today are down 0.3% at $40.65.  The 52-week low is $39.40.

The Market Vectors Oil Services ETF (AMEX: OIH) is down 0.7% at $35.53, so Baker Hughes is actually down a tad less than its peers.

JON C. OGG

Gasoline stocks drained as crude rose, with a drop of -2.797 million barrels to 204.3 million barrels.  Dow Jones was expecting a drop of only 300,000 and we were only expecting a drop of 500,000 or a tad more.

Distillate stocks fell by 969,000 barrels down to 119.8 million barrels.  Dow Jones was calling for a drop of only 200,000 barrels and we do not track estimates on this reading.

The big reading comes on the refining side as refineries ran at 88.3% capacity in the last week.  This is up from 86.4% the prior week and well above the 86.7% expected from Dow Jones.  We were hoping for 87% but any gains would have been welcome here if you are in the camp of ample supplies of gasoline and other finished products ahead of the key Memorial Day weekend surge in gasoline demand.

Market Vectors Oil Services ETF (AMEX: OIH) has risen into this news with a gain of 1.9% to $36.94 and this is off of nearly 52-week lows as the 52-week range is $35.80 to $45.14.  That refining capacity should be a boost for Valero Energy Corporation (NYSE: VLO) with again of 3.4% at $22.25 and the newly-listed Phillips 66 (NYSE: PSX) with a gain of 1.4% at $32.12.

Even the United States Oil (AMEX: USO) is up 0.6% at $35.50.

JON C. OGG

The United States Oil (AMEX: USO) is now down 4.1% at $37.23 and the Market Vectors Oil Services ETF (AMEX: OIH) is down 3.7% at $38.57.  Even the JPMorgan Alerian MLP Index ETN (AMEX: AMJ), which is supposed to not be so tied to oil and gas prices, is down 0.75% at $39.43 against a 52-week high of $41.68.

Maybe dividend hikes are helping to mitigate some of the losses in the major integrated oil outfits.  Exxon Mobil Corporation (NYSE: XOM) is down only 1.2% at $84.60 and Chevron Corporation (NYSE: CVX) is down about 2.1% at $103.75.

The drop is rather large in Schlumberger Limited (NYSE: SLB) with a loss of 3.7% at $69.95 for a loss of about $3 billion in market value.  Baker Hughes Incorporated (NYSE: BHI) has suffered substantially from its highs by a drop of half from its 52-week high and shares are now down 4.4% at $40.97.

Elsewhere shares of Transocean Ltd. (NYSE: RIG) is down 4.4% at $48.08 (down from a high of over $70), while National Oilwell Varco, Inc. (NYSE: NOV) is down ‘only’ 2.2% at $71.12.

Valero Energy Corporation (NYSE: VLO) is even lower by 3.1% at $22.80 even though certain drops in the price of oil will help its operating margins.  The caveat is that refiners need lower prices and actually they need stable prices so that they can have steadier pricing.

While its move to oil is marred by corporate problems tied to its CEO and governance issues, Chesapeake Energy Corporation (NYSE: CHK) is the only stock up on the major oil and gas stocks we follow.

This drop to $98 in crude is the lowest level since roughly February 10, 2012.  This is setting up to be the worst week for crude since the end of September.

JON C. OGG

The lowered expectations were the result of production slowdowns by natural gas producers like Chesapeake Energy Corp. (NYSE: CHK) that have been bedeviled by low natural gas prices. The slowdown has pushed down rig rates as the services companies seek to keep busy.

Baker Hughes may have been the bigger surprise today. The company had been tamping down EPS expectations for the whole quarter. The initial estimate for first quarter EPS came in at $1.25, gradually sinking to $0.80. Baker Hughes reported EPS of $0.86 today on revenues of $5.36 billion, which also topped the consensus estimate of $5.22 billion.

Weatherford actually missed estimates today, but the company’s upbeat outlook made up for the misses. The company posted adjusted EPS of $0.25 versus an estimate of $0.28. Revenue totaled $3.6 billion versus an estimate of $3.64 billion. Weatherford’s EPS was more than twice what it reported in the same period a year ago and revenues were up 26%.

Weatherford forecast second quarter earnings of $0.24-$0.26, a penny below the consensus estimate of $0.27 and the company expects “modest” revenue and operating income growth for the full year compared with 2011. The company believes it is well-positioned to take advantage of increased activity in Canada and some US oil basins.

Baker Hughes plans to cut capital expenditures by $400 million for the year and the company said it will solve its supply chain issues this quarter. The company did not offer further guidance for the second quarter, but the consensus estimate calls for EPS of $0.77 on revenues of $5.24 billion.

Halliburton and Schlumberger both topped lowered estimates last week, and National Oilwell Varco is slated to post EPS of $1.39 on revenues of $4.29 billion tomorrow. The company’s EPS estimate is actually higher than the initial estimate of $1.36 and the revenue estimate is more than 25% higher than actual revenue in the same period a year ago.

Baker Hughes’ shares are up 6.7% at $43.85 in a 52-week range of $39.40-$81.00.

Weatherford’s shares are up 3.9% at $14.23 in a 52-week range of $10.85-$22.76.

National Oilwell Varco shares are up 1.9% at $78.74 in a 52-week range of $47.97-$87.72.

Halliburton’s shares are up 2.4% at $33.73 in a 52-week range of $27.21-$57.77, and Schlumberger’s shares are up 2.8% at $73.15 in a 52-week range of $54.79-$95.53.

The Market Vectors Oil Services ETF (AMEX: OIH) is up 2% at $40.22 in a 52-week range of $35.80-$45.14.

Paul Ausick

Keep in mind that Schlumberger is a whopping 19.98% weighting in the key oil services ETF of Market Vectors Oil Services ETF (AMEX: OIH).  As goes Schlumberger, so goes the ETF.  At $39.65, this ETF has traded in a range of $37.25 to $45.14 over the last 52-weeks.

Oilfield Services revenues were $9.92 billion and that is down 4% sequentially but up 22% year over year; and pretax operating income of $1.94 billion was down 10% sequentially but increased 33% year-on-year.  The company’s distribution revenue of $713 million was up 4% sequentially and 19% year-on-year.

The company noted that the revenue drop was a part of the normal seasonal slowdown in product, software and multiclient sales.  Excluding seasonal sales effects, North America revenue was called flat sequentially.  Another change is that the move of rigs on land and service capacity from gas-rich to liquids-rich basins accelerated. Offshore, increased drilling and deepwater exploration activity in the US Gulf of Mexico contributed positively to results.  The company remains cautious about North America.  Land activity was said to have remained strong in the Middle East and North Africa.  On contracts, Schlumberger also noted that pricing sentiments are starting to move upwards and it went to note that the risk of a double-dip global recession has declined.

Oil companies rarely give formal guidance but the report noted, “We maintain our positive view on the international markets and expect the rig count to grow by more than 10% in 2012 through strength in exploration and deepwater activity as well as in key land markets.”

Schlumberger spent $324 million in the quarter to repurchase 4.4 million shares of its common stock at an average price of $74.01 per share.

Shares closed at $69.80 on Thursday and the 52-week trading range is $54.79 to $95.53.

JON C. OGG

Lower demand expectations and a weak market have shares of Exxon Mobil Corporation (NYSE: XOM) down by -2.2% at $82.03 against a 52-week trading range of $67.03 to $88.13.  Baker Hughes Incorporated (NYSE: BHI) has been among the weakest of all large oilfield services players and shares hit a new 52-week low of $39.40 today against a 52-week range of $40.20 to $81.00.  The Market Vectors Oil Services ETF (NYSE: OIH) is down 2% at $38.61 against a 52-week range of $35.80 to $45.14.

The EIA now expects the price of West Texas Intermediate crude oil to average about $106 per barrel in 2012, which is the same as last month’s projection but it is $11 per barrel higher than the average price last year. Transportation constraints from the U.S. midcontinent region remain a reason for the discounting. The EIA further went on to say that it expects WTI prices to remain relatively flat in 2013 around $106 per barrel with an average refiner acquisition cost of crude oil averages $110 per barrel in the United States.  With refining at risk for price spread gaps, Valero Energy Corporation (NYSE: VLO) is down 4.3% at $23.64 against a 52-week trading range of $16.40 to $29.55.

The EIA expects gasoline retail prices at $3.81 per gallon on average in 2012 and $3.73 per gallon in 2013.  The average listed by the EIA was $3.53 per gallon in 2011.

There is a mixed bag for coal producers who have seen their shares battered: “EIA expects electricity generation from coal to decline by about 10 percent in 2012 as generation from natural gas increases by about 17 percent. EIA forecasts that electricity generation from coal will increase by about 7 percent and generation from natural gas fall by 3 percent in 2013 as projected coal prices to the power sector fall slightly while natural gas prices increase, allowing coal to regain some of its power sector generation share.”

Chesapeake Energy Corporation (NYSE: CHK) has not been able to avoid the hangman today with shares down 3.5% at $20.70 against a 52-week range of $20.41 to $35.75 despite announcing some fresh asset sales.

Shares of Peabody Energy Corporation (NYSE: BTU) are down 0.7% at $27.52 and the prior 52-week trading range before today was $27.61 to $68.30.  The Market Vectors Coal ETF (NYSE: KOL) is down 1.4% at $30.89 against a 52-week range of $27.42 to $51.69.

JON C. OGG

Gasoline inventories fell by 3.324 million barrels to 206.271 million barrels, worse than the drop of 1.7 million expected by Dow JOnes.  Distillates fell by 4.266 million barrels to 149.739 million barrels, also worse than the 1.7 million draw expected by Dow Jones.

The other issue to consider is a lower refining capacity.  Refineries in the last week were shown to be at 83.1%.  While some slowing is routine, this is down from 84.2% a week earlier and worse than the 83.8% expected by Dow Jones.

Valero Energy Corporation (NYSE: VLO), the king of independent refineries, is now up 1.3% at $23.70 and is challenging 5-day highs.  Oil Services HOLDRs (NYSE: OIH) is up 0.7% at $121.95, also challenging 5-day highs.

The United States Oil (NYSE: USO) Fund is up 0.9% at $34.47, above yesterday’s high of $34.45 and back at the highest levels since September 16.  WTI is up $0.80 at $89.14 on last look.

JON C. OGG

The company beat EPS expectations of $0.15, posting earnings of $0.17, excluding items. Revenue came in at a record $3.05 billion. Strong demand in the US and overseas gets the credit. Weatherford’s share price has trailed its rivals mainly because Schlumberger, Halliburton, and Baker Hughes all made big acquisitions last year that have begun to pay off for them in revenues and profits.

Weatherford is also a portfolio company in several major oil field services ETFs, including Oil Services HLDRS (NYSE: OIH), SPDR S&P Oil & Gas Equipment & Services (NYSE: XES), PowerShares Dynamic Oil & Gas Services (NYSE: PXJ), and iShares Dow Jones US Oil Equipment Index (NYSE: IEZ).

The Oil Services HLDRS (NYSE: OIH) holds more than 45% of assets in Schlumberger, Halliburton, and Baker Hughes. Weatherford accounts for about 4.7% of total assets of $2.9 billion. OIH has posted a daily high today of $163.63, before pulling back to below $162. The 52-week trading range is $96.10-$167.37.

The SPDR S&P Oil & Gas Equipment & Services (NYSE: XES) is an equally-weighted fund that holds about 2% of its total assets of about $519 million in Weatherford shares. Shares came within pennies of posting a new 52-week high this morning, but are now trading at $43.97, slightly down from yesterday’s close at $44.03. The 52-week range is $25.38-$44.63. The fund gets a 3-star rating from Morningstar.

The PowerShares Dynamic Oil & Gas Services (NYSE: PXJ) holds about 4.7% of its $254 million of total assets in Weatherford shares. Shares rose as high as $26.55 this morning before pulling back to $23.65. The 52-week range is $14.73-$26.84. The fund gets a 2-star rating from Morningstar.

The iShares Dow Jones US Oil Equipment Index (NYSE: IEZ) holds about 4.2% of its $707 million in total assets in Weatherford shares. The fund posted a new 52-week intra-day high this morning before pulling back to stand currently at $68.67. The new 52-week range is $37.77-$69.39. The fund gets a 3-star rating from Morningstar.

Because Weatherford does not play a large role in any of these funds its impact is limited. As a whole, though, the oil field services sector is currently flourishing. Demand for rigs and equipment to drill for shale gas in the US is primarily responsible.

In the future, keep an eye on announcements from Petrobras for new contracts as well as contracts of northern and western Africa and in Iraq. The sector is could be ready for a nice upturn, with the ETFs hanging on for the ride.

Paul Ausick

Oil got another boost over the holiday weekend from a forecast in Barron’s predicting $150/barrel by the end of the second calendar quarter of 2012.  Growth of demand from developing markets, combined with a tight supply are the main drivers of the steep predicted rise.  Despite the notion that the “bulls may have been too bullish” we have looked through our list of mutual funds and exchange-traded funds which we think will benefit the most from the upside in oil.  Other leveraged funds exist, but we stuck with the volume and safety parameters in mind.

A price increase of this magnitude suggests that mutual funds and ETFs that hold substantial assets in exploration & production or oil field services stocks could be positioned for more growth. For comparison purposes, we’ve selected the Oil Services HOLDRS ETF (AMEX: OIH) and the ProShares Ultra Oil & Gas ETF (NYSE: DIG). We’ve looked at several funds and ETFs: PowerShares S&P SmallCap Energy ETF (NASDAQ: PSCE), SPDR S&P Oil & Gas Exploration and Production ETF (NYSE: XOP), PowerShares Dynamic Oil & Gas Services ETF (NYSE: PXJ), Fidelity Select Natural Resources (FNARX), and Putnam Global Natural Resources (EBERX).

The Oil Services HOLDRS ETF (NYSE: OIH) holds about $2.9 billion in assets. Year-to-date, the fund has returned 9.13% and its trailing three-month performance is -6.96%. OIH holds just 14 stocks, all of which are primarily oil field services companies.

The ProShares Ultra Oil & Gas ETF (NYSE: DIG) holds about $342 million in assets, and its year-to-date return is 22.70%, while its trailing three-month performance is -9.87%. DIG is a leveraged ETF that seeks to return 200% of the performance of the Dow Jones U.S. Oil & Gas Index.

The PowerShares S&P SmallCap Energy ETF (NASDAQ: PSCE) holds $107 million in assets. Year-to-date returns total 17.50%, while the  trailing three-month return is -6.25%. The fund holds just 20 stocks, with a mix of E&P and services companies. Its year-to-date return is nearest to that of DIG, and its three-month performance is about 50% better.

The SPDR S&P Oil & Gas Exploration and Production ETF (NYSE: XOP) holds about $603 million in total assets, and posts a year-to-date return of 13.72%. It’s trailing three-month return is -7.8%. Year-to-date this fund is performing about 50% better than OIH.

The PowerShares Dynamic Oil & Gas Services ETF (NYSE: PXJ) holds $245 million in total assets and has a year-to-date return of 13.51%. The trailing three- month return is -6.31%. The fund’s largest holding is Halliburton. Compared with OIH, the year-to-date return is about 48% higher.

The Fidelity Select Natural Resources (FNARX) fund holds total assets of $1.8 billion. The fund’s year-to-date return is 8.72% and its trailing three-month return is -6.04%. Chevron Corp. is the fund’s largest holding, while Halliburton is its largest services holding. Compared with DIG’s year-to-date return, the fund is performing less than half as well.

The Putnam Global Natural Resources (EBERX) fund holds total assets of $471 million. The fund’s year-to-date-return is 8.14%, and its trailing three-month return is -1.93%. It’s single largest holding is Exxon Mobil Corp., while Schlumberger Ltd. is its largest services holding. This fund also trails the returns of DIG by more than half, although its three-month performance is substantially better.

You will probably notice that the United States Oil (NYSE: USO) exchange-traded product is not on this screen despite it being the closest oil-tracking ETF for the price of oil.  The rolling nature of front-month futures expiring and the lack of overnight tracking all eliminate this from even being a top tracking mechanism in general.

Oil field services stocks, as a group, have performed better than E&P stocks primarily because natural gas drilling has increased onshore in the US, and more offshore drilling is getting lined up offshore of Africa. These stocks will get another boost when (if) work begins in earnest in Iraq.

E&P stocks benefit from higher crude prices, but only up to a point. When gasoline pump prices get to be in the $4-$5 range in the US, consumption decreases. When crude prices get threaten to hit $125/barrel, consumption in emerging nations can stall.

That doesn’t change the fact that currently supply dominates pricing. And that is unlikely to change — at least for a very long time.

Paul Ausick