By Stockpickr Staff
Posted on May 26, 2009

As worldwide industrial and economic conditions improve, the spot price of oil will invariably increase. Another catalyst is a weaker U.S. dollar, one of the drivers behind oil's recent spike.

Strategies for playing oil have focused on major integrated oil companies such as Transocean (RIG), National Oilwell Varco (NOV) AND Exxon Mobil (XOM). For this week's Rocket Stocks portfolio, here are five more oil stocks that could head higher as the spot price of oil increases.

Dril-Quip (DRQ): Dril-Quip designs, manufactures,\ and sells a wide array of products used for offshore drilling, as well as production equipment for use in deep water. The company’s principal products consist of subsea and surface wellheads, subsea and surface production trees, subsea control systems. Some of Dril-Quip’s clients include Murphy Oil (MUR), BP (BP), Exxon Mobil, Conoco Phillips (COP), ATP Oil & Gas (ATPG) and Petrobras (PBR).

Dril-Quip’s revenue rose from $222 million in 2004 to $543 million in 2008, and the company’s backlog increased from $127 million to $603 million in the same time frame. Net income rose from just $12.5 million in 2004 to $105.6 million in 2008, and net income margin grew from 5.6% in 2004 to 19.5% in 2008.

Gulfmark Offshore (GLF): Gulfmark Offshore is a $750 million company that provides offshore marine services to companies involved in offshore exploration and production of oil and natural gas.

With the price of oil now above $60 per barrel, rigs are under substantial pressure to drill as much as possible in order to take advantage of increase in spot day rates. Gulfmark has substantial control in the deep waters of the North Sea and South East Asia, where margins have been increasing exponentially.

The company has exceeded analyst estimates in four out of the past eight quarters by an average margin of 38.5%. Gulfmark’s EBITDA increased from $42 million in 2004 to $216 million in 2008, as net income rose from just $400,000 to $150 million in the same time period. Earnings per share grew from 2 cents per share in 2004 to $6.13 per share in 2008.

Houston American Energy (HUSA): Houston American, which operates as a mid-sized oil producer in both Texas and Colombia, has had a 52-week trading range of $11.98 to $1.58, with the stock recently trading near its 52-week low, which it hit on April 7.

Unlike most mid-sized oil producers, Houston American has a superb balance sheet, with $10 million, or 20% of the company’s market capitalization, in cash, and zero debt on its books. Moreover, the company was profitable in 2008, and management also currently owns 55.45% of the company, suggesting an elevated conviction level on the company’s growth prospects.

Currently, the company is producing about 500 barrels of oil per day, but these number are expected to rise several hundred percent as additional wells are brought online throughout Texas and Colombia in 2009.

Unlike Venezuela, Colombia is currently a net exporter of oil to the tune of approximately 325,000 barrels of oil per day, but the country’s reserves and productions rates have been declining. Thus, the country has enacted several lucrative offers for foreign oil companies, some of which will benefit shares of Houston American.

Colombia is offering 100% company-specific ownership of production projects and substantially lower royalty rates and fees associated with production. All of this will equate to higher operating margins going forward. Houston American owns about 790,000 gross acres of land in Colombia, identifying more than 100 current drilling locations.

Houston American's CEO has publicly stated that at around $100 per barrel, oil the company will have $13 in cash per share by 2011. Extrapolating that statement further, the company should have no less than $4 to $5 per share in cash by 2011.

Oil States International (OIS): Oil States International offers various services on natural gas and oil well sites and is also involved in the deep water offshore drilling products business. The company has a large interest in the Canadian tar oil sands located in Alberta. Much of the world's oil (more than 2 trillion barrels) is in the form of tar sands, although it is not all recoverable.

The stock is selling at 10 times forward 12-month earnings per share, with a five-year consensus growth rate of 25% annually, producing an attractive P/E-to-growth ratio.

It's in all of the right market segments, but Oil States is still dirt cheap.

Vaalco Energy (EGY): Vaalco Energy is a mid-sized oil producer located in the deep waters of the African coasts of Gabon and Angola. The company also has stakes in various oil and natural gas projects in the UK and the Texas gulf coast. Vaalco Energy has $90 million of cash sitting in the bank and zero debt.

Vaalco’s Gabon asset, called the Etame field, began oil production in September of 2002 and is currently producing 11,000 barrels of oil per day. In total, the Etame field and another Ebouri field have a total reserve potential in excess of 60 million barrels of oil.

Vaalco’s Angola asset is called Angola Block 5 for the region it is located in. The company believes that this field's potential is approximately 150 million barrels.

For more ideas, including McMoRan Exploration (MMR), Weatherford International (WFT) and DryShips (DRYS), check out the Oil Rocket Stocks portfolio.