Profit from High Crude Oil Prices with These Secure, Under-the-Radar Stocks

WTI crude oil prices for August delivery were down slightly yesterday (Tuesday) to $103.43 a barrel, which was a $0.10 drop from Monday.
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Crude oil prices have trended down in July as Sunni militants in Iraq have yet to threaten southern Iraq, where much of the country's oil exports are produced. Instead, the ISIS (Islamic State in Iraq and Syria) militants have focused their attacks on the country's political center of Baghdad.

While that has driven WTI (West Texas Intermediate) crude oil prices down from their 52-week high of $107.50, they are still significantly higher in 2014. In fact, they're up more than 15% from the 52-week low of $89.74 in January.

The southern oil fields may not be in danger, but the overall crisis is still affecting oil prices. That, according to Money Morning's Global Energy Strategist Dr. Kent Moors, will keep crude oil prices high.

"The longer the unrest takes place in Iraq in general, and Baghdad in particular, uncertainty will ripple through the market," Moors said on CNBC last week.

"Paralyzing the government in the capital city would create significant problems for both the production and export of oil," Moors said. "There would be no administrative structure, no reliable regulatory oversight, and a rising inability for operating companies to budget and plan."

And while oil prices continue to rise, that doesn't have to be a bad thing for consumers and investors. According to Moors, that price uncertainty is creating a profit opportunity for some North American oil stocks...

"One benefit [of turbulent oil prices], is for those companies that actually have a security premium built into them, and by that I mean North American producers and producers that are medium- and smaller-sized companies," Moors said.

"We have smaller companies now in the United States that are benefitting from the unrest abroad, and they tend to produce higher profit results than the bigger companies. This is likely to continue the longer the uncertainty remains."

These smaller American oil companies focus almost entirely in the United States and in areas unaffected by political or military turmoil. They are able to sell oil at higher prices, without dealing with the foreign uncertainty.

"These companies tend to be well managed, they tend to be leaner, they tend to emphasize basins they know well, and they've been doing this for years," Moors said "They come in under the radar and they produce at a profit in a market that is secure, unlike foreign sources of crude oil."

Here are the three oil stocks Moors has pinpointed for investors looking to cash in now on high crude oil prices...

Stocks Profiting from High Crude Oil Prices

Carrizo Oil & Gas Inc. (Nasdaq: CRZO) is a Houston, Texas-based independent energy company that explores, develops, and produces oil and gas in the United States and the UK. It focuses on proven, producing oil and gas plays including the Barnett Shale in north Texas, the Marcellus Shale in Appalachia, and the Eagle Ford Shale in south Texas, among others.

CRZO stock trades at $67.25 and is up 50% year to date, and 17% since the beginning of June. The company has beat earnings estimates for four consecutive quarters and by an average of nearly 13%. In its upcoming earnings report the company is expected to post a 9% gain in EPS and 25% gain in revenue year over year.

In a recent poll by Thomson/First Call, four analysts rated CRZO as a "Strong Buy," 11 as a "Buy," and seven as a "Hold." No analysts rated the stock as an "Underperform" or "Sell."

Goodrich Petroleum Corp. (NYSE: GDP) is an independent oil and natural gas company that explores, produces, and develops oil and natural gas in northwest Louisiana, east Texas, and south Texas.

Shares of GDP currently trade for $22.51, but 22 brokers polled by Thomson/First Call have placed an average price target of $31.27 for GDP. That's a 39% gain from where the stock trades now. Currently, seven analysts have GDP rated as a "Strong Buy," 12 as a "Buy," five as a "Hold," and just one as an "Underperform."

GDP stock has already enjoyed a nice bump, up 32% year to date and 75% in the last 12 months. If the unrest in Iraq continues to keep crude oil prices elevated, stocks like GDP will continue to benefit.

Magnum Hunter Resources Corp. (NYSE: MHR) is the third American oil stock Moors recommends. Also headquartered in Texas, MHR explores, exploits, acquires, develops, and produces crude oil, natural gas, and natural gas liquids. The company works in West Virginia, Ohio, Texas, Kentucky, North Dakota, and Saskatchewan, Canada.

MHR is the cheapest stock on this list, trading at $7.88 per share. Since June, MHR stock has gained 3%. It's up 8% in 2014.

While MHR currently isn't profitable, it has beaten earnings estimates the past three quarters and posted quarterly revenue growth of 98% year over year last quarter. Currently, 19 analysts have an average price target of $9.49 for MHR stock, which would be a 20% gain from where the stock trades today.

Do you plan on investing in American oil stocks as crude oil prices rise? Join the conversation on Twitter @moneymorning using #Oil.

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