3 bargain value stocks I'd buy right now

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Gulf Keystone Petroleum Shaikan

The oil and gas industry continues to face an uncertain future. A glut of supply has forced the oil price lower in recent years. While cuts in production from OPEC may have supported the price of black gold to some extent this year, the reality is that it remains a long way off its previous highs.

Looking ahead, more volatility could be on the cards. This may cause a high degree of uncertainty for oil and gas explorers and producers. However, here are three oil and gas stocks which could still offer investment potential over the long run.

Positive update

Reporting on Friday was Angus Energy(LSE: ANGS). The onshore oil and gas development company announced that operations at the Lidsey Oil Field are on schedule and that recent guidance is unchanged. Its drilling programme is on track, and it expects to recommence production in October.

Furthermore, the company has also reported further enhancements to its Brockham site. It has submitted amendments to its FDP (Field Development Plan) Addendum which include provisions for on-site power generation. There is also the added benefit within the plan of allowing Angus Energy to repurpose surplus power to National Grid.

While a relatively small player within the oil and gas industry, Angus Energy appears to be making encouraging progress with its strategy. Clearly, it is highly dependent upon further news, but it could deliver strong share price growth over the long run.

A new era

Also offering upside potential in the long run are Gulf Keystone Petroleum(LSE: GKP) and Genel Energy (LSE: GENL). They have faced a highly challenging period in recent years, with conflict in Northern Iraq making their operations much more uncertain. This has caused investor sentiment to decline, while underpayment for oil exports has also kept their financial performance at lower-than-anticipated levels.

Now, though, both stocks could offer favourable risk/reward ratios. The geopolitical outlook for the region has improved, and payments for oil exports are now being received on a regular basis. In fact, Genel recently signed a deal with the Kurdistan Regional Government (KRG) to provide it with a larger cut of future oil exports in return for a cancellation of previous amounts owed. Meanwhile, Gulf Keystone continues to await payment for some of its previous exports.

Investment potential

Looking ahead, both stocks are forecast to report significant improvements to their bottom lines. Next year, Gulf Keystone is expected to record a rise in its earnings of 120%, while Genel's net profit is due to surge 70% higher. Despite this, they both trade on relatively low valuations. The two companies have price-to-earnings growth (PEG) ratios of 0.2, which indicates they offer wide margins of safety.

Given the continued uncertainty in the region, a wide margin of safety may be required in case there are unforeseen difficulties over the medium term which disrupt their financial and/or operational performance. However, with brighter outlooks and low valuations, Gulf Keystone and Genel appear to be highly enticing shares for the long run.

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Peter Stephens owns shares in National Grid. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.