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Dicker and Link: Oil Prices are Ridiculously Low, Opportunity Still Abounds in E+P

Tickers in this article: APC HES NBL

NEW YORK ( TheStreet) -- I was talking to Stephanie Link today about the oil markets and the earnings of some of the junior exploration and production oil companies that have rolled in over the last few days.

I mentioned to Stephanie that I had rarely seen an oil market so shrouded in turmoil in my entire career. There are relatively few global producers of oil that don’t have their production at risk today.

Russia is seeing sanctions from the U.S. threaten its oil production growth. Iraq is struggling on the precipice of a civil war. Syria still is smoldering. Iran cannot find a suitable agreement for its nuclear program and is again at risk for a further tightening of sanctions. The U.S. embassy in Libya's capital had to be evacuated because of nearby fighting. Israel has troops in Gaza. The list is staggering.

Yet, oil continues to muddle along at little more than $100 a barrel. I told Stephanie in other times of conflict as widespread as today we’d see oil prices that were closer to $125 a barrel.

It seems to me that far too many investors are taking the oil market for granted and most of the committed investors in oil are already long. With summer in full swing, there is a lack of interest in the oil markets and very quiet price action. But I told Stephanie I didn’t think that would last.

Geopolitical pressures may not have immediate effect on oil prices, but the cumulative effect of so many barrels at risk would impact prices sooner or later. But while prices are low it is a good time to look critically at some of the junior exploration and production companies that are increasing production.

Anadarko recently reported spectacularly, with increased production blowing out all expectations in the Wattenberg shale, earnings almost 20 cents a share higher than any analyst predicted and a huge eight million acres of Colorado mineral rights that are ready to be spun out. I reiterated my $130 target on this company.

Noble is equally strong in the Wattenberg, but guided negatively based upon new regulations proposed in Colorado increasing the fracking setback to 2,000 feet. This comes for a vote in November and will likely pass. Still, I see value in buying these shares as prices retreat.

Finally, Hess is continuing its restructuring and increasing production in its Bakken holdings. Company officials spoke during the conference call of a new master limited partnership spinoff of infrastructure in the Bakken that will unleash even more value.

If you believe as I do that oil prices will inevitably rise, these companies still have much more to deliver to shareholders in the coming year and need to be bought.