Time To Consider These 3 Energy Companies: Talisman Energy Inc. (USA) (TLM), BP plc (ADR) (BP), Transocean LTD (RIG)

Investors seeking value could start at looking at beaten out-of-favor companies in the energy sector. Companies making the headlines offer a glimpse on their future prospects.

BP plc (ADR) (NYSE:BP) for instance, had its reputation tarnished after the spill in the Gulf of Mexico. Even with all litigation costs accounted for, investors are assigning a low valuation to its shares. BP plc (ADR) (NYSE:BP) trades with a forward P/E of 8 and are valued just 10% above its book value of $37.71. Looking back at its fiscal year results since 2009 (but excluding fiscal 2012), there are some weaknesses. It is cash flow:

Data Source: www.kapitall.com

Weakening cash flows in BP plc (ADR) (NYSE:BP) is expected as the company sells down assets and reserves funds for litigation settlement. In the interim, investors get paid a dividend yielding 5.31%.

Risks could hurt BP plc (ADR) (NYSE:BP) shares in the short-term. A recent court ruling could mean that BP has to provide higher compensation for the oil spill than originally thought. BP plc (ADR) (NYSE:BP) detailed the ruling in its annual filing.

Also associated to the Gulf of Mexico spill is Transocean LTD (NYSE:RIG) . Both Transocean and Haliburton were being accused by the Justice Department of gross negligence in late-February 2013. The company is in the headlines again after the board recommended re-initiating dividends at a rate of $2.24 per share. Activist investor Carl Icahn wanted $4 per share. The company reported quarterly earnings of $0.91 per share on revenue of $2.32 billion. Special gains of $0.35 per share came from favorable tax treatment. Discontinued operations also helped earnings. Transocean LTD (NYSE:RIG) sold down its shallow water rigs.

A recent lower-court ruling in a New Orleans appeals court favored BP related to the Gulf spill. BP plc (ADR) (NYSE:BP) will have access to $750 million in Transocean LTD (NYSE:RIG)’s insurance.

Overall, Transocean LTD (NYSE:RIG) is shoring up its balance sheet. The company aims to reduce debt by $1 billion by the end of the year 2014. The company is already obligated to pay debts totaling $1.36 billion in that time frame.