Sub-$10B Energy Stocks For 2013

Energy stocks have had their shares of trials and tribulations in 2012. Of the nine select sector SPDRs ETFs, only the Utilities Select SPDR

has performed worse than the Energy Select Sector SPDR

this year. The average return offered by Exxon Mobil

, Chevron

and ConocoPhillips

this year is just about 3.5 percent, well below the 13 percent offered by the S&P 500. At the single stock level, at least among the sector's giants, the performances have not impressed. Even when factoring in the decent dividend yields of the aforementioned trio, their returns still lag the broader market. Missed production targets were the undoing of many major oil and gas companies in 2012. A lethargic global economic recovery has not helped matters, either. Perhaps due to the slowing production growth seen by the major integrated oil names,

energy names because they offer more upside potential. That advice also means evaluating some energy equities with smaller market caps, but while the following names may be light on market value, they are not light on upside potential in 2013.

With a market value of $9.76 billion, Cobalt resides at the higher end of the mid-cap spectrum. Market cap is not what makes Cobalt compelling. Angola is. The African nation is an OPEC member and vies with fellow cartel member Nigeria to wear the crown as the continent's top oil producer. In other words, Angola is home to bountiful oil reserves. For those that are familiar with term "pre-salt" as it pertains to Brazil, it also is relevant with Angola. The Angola pre-salt investment theme is legitimate as the country's pre-salt fields

. It is Angola's pre-salt fields that have increased

. Most recently, Chevron was mentioned as a potential suitor for the company. Remember this: Goldman Sachs

is a major Cobalt shareholder and it would not be surprising to see the bank push for a takeover of the company.

Like Cobalt, Kosmos Energy is a direct play on the African oil boom. The $4.75 billion company is one of the major producers at Ghana's Jubilee Field, where it is

. News of the Jubilee Field production prompted a recent spike in shares of Kosmos, which are up 7.5 percent in the past month, but the stock is down year-to-date. In addition to the potential spoils of the Jubilee Field, Kosmos has often been mentioned as a takeover with

. However, Kosmos takeover rumors are nothing new. Exxon Mobil tried to acquire $4 billion worth of Kosmos in 2010, but Ghana's government scrapped the deal. Then the company rejected an offer from BP

and China's Cnooc

in 2011, indicating that Kosmos may not be as easily acquired as some investors would like to believe. Interestingly, private equity firms Warburg Pincus and Blackstone Group

backed the Kosmos IPO and are major shareholders in the company. That factor alone increases the takeover chatter, but there are hurdles to clear with Ghana's government.

Down 22 percent year-to-date, Laredo Petroleum would arguably a far more controversial name if this $2.2 billion company received more attention from investors and the mainstream financial press. The shares are pricey at 21.2 times next year's expected earnings and trade at almost 77 times Laredo's cash per share. Then there is the debt load. Laredo's long-term debt-to-equity ratio is 1.35. The shares now trade around $17, the same price they cam public at in December 2011. Although the company posted a third-quarter loss, Laredo did increase

. Laredo's oil output jumped 32 percent year-over-year. Two-thirds of Laredo's production comes from the Permian Basin in West Texas, where production is currently booming. The potential 2013 catalyst for Laredo comes in the form of the company's operations at the Cline Shale in the Permian Basin. "We believe the Cline Shale exhibits similar petrophysical attributes and favorable economics compared to other liquids-rich shale plays operated by other companies, such as in the Eagle Ford and Bakken Shale formations,"

. If that prediction proves even slightly accurate, Laredo could offer significant upside.