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Energy Stocks To Buy #1 — Energy XXI (EXXI)

energy stocks to buyEnergy XXI’s (EXXI) bailiwick is buying old shallow water wells in the Gulf of Mexico that firms like Exxon (XOM) don’t want anymore. Those wells come cheap and are pretty abundant. EXXI can then spend a few bucks on various enhanced oil recovery techniques — like CO2 injection — to coax whatever oil is left out of these older wells.

It’s a pretty good and profitable business. And it’s about to get even more profitable with its recent buy of EPL Oil & Gas.

For $2.3 billion, EXXI purchased EPL — a company that’s good at finding pockets of small deposits in the Gulf. By combining the two energy stocks, you now have this pretty nimble firm that will be able to churn out hefty production from all the “junk sites” in the Gulf of Mexico that the big firms don’t want. In fact, after the buyout, EXXI is now the largest producer on the Gulf of Mexico’s shelf and is active in all 10 major production areas. That higher production should lift EXXI’s earnings by 25% in 2015 after it fully digests the EPL acquisition.

And at a forward P/E of 12 and dividend yield of 2%, Energy XI is a pretty cheap, as well.

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