The bull case for Origin Energy Ltd shares

With the share price of Origin Energy Ltd (ASX: ORG) down a whopping 55% in the past 12 months, there is little doubt that this is an unloved, out-of-favour stock.

With the sell-off being driven by a crash in the oil price, the stage could now be set for a rebound if and when the oil price recovers.

In fact, the oil price has already risen off of its lows and this has helped Origin claw its way back to $5 a share from a low of $3.44.

With the oil cycle arguably very near the bottom, now could be a good time for investors to start looking for signs that a sustainable uptrend could occur.

Here are a two points worth factoring into your analysis of the oil market:

  • Oil bankruptcies in the USA from the current turmoil are expected to exceed the total reached during the global financial crisis according to research by accountancy firm Deloitte
  • US drillers cut oil and gas rigs for a 14th straight week. The number of rigs in operation is approaching historic lows according to data compiled by oil services company Baker Hughes Inc

What now

Leading energy producers including Origin, Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) are currently trading at levels not seen in the past decade. While balance sheet risk is a clear concern for some stocks within the sector; for long term contrarian investors, now would still appear to be the right time to take a closer look at these major oil and gas companies.

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Motley Fool contributor Tim McArthur owns shares in Origin Energy Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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