The Energy Department just reported on domestic energy production for the U.S., and the outlook is surprisingly positive. For crude oil, production is up and approaching the historical high achieved in 1970. The New York Times says that, based on this report, the U.S. is "well on its way -- far faster than anticipated even a year ago -- to achieving virtual energy independence."
Also noteworthy is how calm the international energy industry is these days. Over the last several decades, turmoil in various parts of the world, particularly the Middle East, have tended to wreak havoc with oil prices. But, today, oil prices are remaining pretty steady at about $100 a barrel, give or take. That's even with a civil war in Syria, tension over Iran, a new head of government in oil-rich Venezuela and the prospect that Mexico may open its energy sector to private investment for the first time in many decades.
All of this is helping the domestic energy sector, which I wrote about a couple of months ago. Since then, two smaller, under-the-radar energy-sector companies have earned approval from one of my guru-based strategies -- that based on the thinking of Peter Lynch, the great mutual fund manager. The most significant variable in his strategy is the P/E/G ratio, or price-to-earnings relative to growth. An acceptable P/E/G would be up to 1.0, which says you are paying $1 for each percentage point of growth at the current stock price.
The Lynch strategy is very positive about two energy-sector companies in particular.
First is Baytex Energy (BTE), a Canada-based company that buys, develops and produces oil and natural gas in the Western Canadian Sedimentary Basin in Alberta and Saskatchewan, and in North Dakota's Williston Basin. The Lynch strategy approves of this name, as Baytex's P/E/G is an acceptable 0.79.
The other energy firm favored by the Lynch strategy is Bonanza Creek Energy (BCEI). As with Baytex, Bonanza is involved in oil and natural gas acquisition, development and production. However, it focuses on the Niobrara formation in Colorado and the oily sands of Cotton Valley in Arkansas. Bonanza's P/E/G is 0.92 -- and, according to the Lynch strategy, the company is doing a good job managing its inventories.
Both of these companies are doing a good job in a solid industry. They may not provide you with a gusher of wealth, but they could well prove to be steady, worthwhile investments.