Last May, I discussed the possibility of a turnaround for oil & gas exploration and production (E&P) companies. Higher production and cost control measures led to positive earnings estimate revisions.

Three months later, the trend continues. Production levels, particularly in the North Sea and the Middle East, are increasing. Costs continue to be reined in. And analysts are raising their full-year profit forecasts further. During the past few weeks, 292 profit forecasts have been increased.

Commodity Prices Playing A Role

Rising oil prices are helping. Though significantly down from last year (crude peaked at $147.27 on Jul 11, 2008), crude rebounded throughout the second quarter. Furthermore, given the likelihood of economic expansion in the coming months, it is probable that a floor for oil prices has been set.

Natural gas prices may have hit a bottom. Natural gas started the year at $6.50 per million BTU and fell

...