Both oil and natural gas have rebounded from their multi-year lows reached in 2016 and while the commodities may not be at levels many thought they would be at the end of the year, even at today’s prices certain companies are in a position to earn profits.

As proof, over the past four quarters, the number of rigs searching for oil and gas in the country have been surging. According to Baker Hughes, the GE-owned company’s closely watched weekly report, the oil rig count was 765 last week and the natural gas rig count was 187 – each of them more than doubling from year ago levels.

Throughout the downturn, energy firms worked tirelessly to cut costs down to a bare minimum and look for innovative ways to churn out more oil and gas. And they managed to do just that by improving drilling techniques and extracting favorable terms from the beleaguered service producers.

Oil’s recovery to $45 and natural gas touching the magic $3, predictably, has had a positive effect on stocks in the sector. In particular, savvy investors might view the price bump as the impetus the stocks need after free falling for three years. Undoubtedly, still a long way to go, but improving crude and natural gas prices may have already primed certain energy producers and linked entities for upward momentum.

True, the energy market faces many uncertainties and it may not be time to buy stocks indiscriminately, but there are players that look like pretty compelling investments.

Good Time to Buy High Quality E&P Names

Oil prices have gained almost 10% since falling to a ten-month low in late June. The recent rebound has been fueled by multiple weeks of strong inventory draws in the U.S. crude and gasoline stockpiles.

While all crude-focused stocks stand to gain from the nascent oil rally, companies in the exploration and production (E&P) sector are the best placed, as they will be able to extract more value for their products.

Moreover, the firms boast conservative balance sheets with enough cash on hand and manageable leverage. This provides them ample flexibility to make acquisitions or grow internally. Moreover, driven by operational efficiencies, these entities have been able to reduce unit costs — an impressive achievement amid the low realization scenario.