Valuing HollyFrontier based on its past earnings makes it look deceptively cheap. It is trading around 5.3 times historical earnings, but taking into account falling margins and falling earnings it is trading at 9.5 times expected 2014 earnings, placing it much closer to industry averages.
Halliburton Company (NYSE:HAL) is one of the biggest beneficiaries of America’s peak oil strategy. Increasing production through hydraulic fracturing has been a key tool for the nation, and Halliburton has a great deal of experience providing hydraulic fracturing services. From the beginning of 2012 to the second quarter of 2013 it reduced the average number of drilling days per horizontal well from 25.7 to 20.5. This helps to decrease costs for owners and boost overall returns.
Halliburton offers oil field services to field owners, and the large state oil company Pemex has already asked for Halliburton’s help. With a reasonable debt load and a total debt to equity ratio of 0.31, Halliburton is well positioned to take America’s technology overseas.
Foolish final thoughts
The idea of peak oil strikes fear in the hearts of many Americans, but the reality is that the U.S. is already preparing itself for a world with less affordable oil. Clean Energy Fuels is a good way to play the rise of alternative fuels. Kodiak and Halliburton are two companies taking advantage of the nation’s growing production, but Halliburton’s cleaner balance sheet makes it a safer option. HollyFrontier is one refiner stuck with the short end of the stick, as rising U.S. oil prices will put a big dent in its earnings.
The article America’s Peak Oil Plan in Two Charts originally appeared on Fool.com and is written by Joshua Bondy.
Joshua Bondy has no position in any stocks mentioned. The Motley Fool recommends Clean Energy Fuels and Halliburton.
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