Oil States International, Inc. (OIS), Hess Corp. (HES): Einhorn Favors These 2 Opportunistic Stock Ideas

Continental Resources is the major oil/gas player in the North, South, and East regions in the U.S. At the end of 2012, Continental Resources had nearly 785 million BOE, of which 66% were from the North Dakota region, while Montana Bakken’s proved reserves were 45 million BOE. In the first quarter of 2013, Continental Resources increased its net production in the Bakken play in North Dakota and Montana by 60% to around 76,900 BOE per day.

The total revenue in the quarter rose significantly, from $395.1 million last year to nearly $710.3 million, mainly due to the lower loss on derivative instruments. Net income witnessed 100% year-over-year growth, from $69 million, or $0.38 per share, to $140.6 million, or $0.76 per share. The market values the company at 8.78 times EV/EBITDA.

Hess is valued much cheaper. At $69 per share, Hess is worth around $23.6 billion. The market values Hess at only 4.11 times EV/EBITDA. Moreover, Hess is currently paying shareholders a 0.6% dividend yield, while Continental Resources has not paid any dividends yet. Hess could be worth much more in the buyout transaction. If Hess has the comparable valuation to its peers, it should be worth around $80 to $90 per share.

My Foolish take

Indeed, both of these oil/gas companies, Oil States and Hess, seem to be good opportunistic plays for investors. Oil States could deliver much more value for shareholders if it could separate the Accommodations segment and turn it into REITs. If Hess could spin off several non-core assets, restructure the midstream and downstream assets, and streamline international portfolio, it could experienced the upside of more than 80% as mentioned above.

The article Einhorn Favors These 2 Opportunistic Stock Ideas originally appeared on Fool.com and is written by Anh HOANG.

Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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