It’s no secret that energy sector companies are hurting from a decline of more than 50 percent in crude oil prices from a year ago. As a result, third-quarter earnings aren’t going to be pretty.

While picking tops and bottoms in any market is a dangerous business, experts believe the worst could be behind us for the drop in crude oil prices. This might be the time for bargain-hunting investors looking for value to explore opportunities in energy stocks, analysts say.

Brace yourself. Third-quarter earnings per share for Standard & Poor’s 500 index energy sector companies are forecast to show a 66 percent decline year over year, according to S&P Capital IQ, a financial information provider in New York. “You have to steel yourself for a lot of bloodletting in the third quarter. But look past that and think about whether 2016 will be an improvement. We think it will be a mild improvement,” says Stewart Glickman, energy equity analyst at S&P Capital IQ.

Crude oil prices tumbled sharply over the past year, driven down in part by climbing U.S. oil production and weaker global demand. West Texas Intermediate crude oil futures hit a low at $37.75 per barrel in August, down from more than $107 per barrel in June 2014. The sharp declines have taken a toll on U.S. production levels, as drillers pulled back amid the falling price environment.

“It feels like $38 per barrel is a bottom. We don’t think that we’re in a global recession, and you don’t usually see prices like $20 per barrel if we’re not going into a global recession. As with any commodity and certainly with oil, the best cure for lower oil prices is low oil prices, just like the best cure for high oil prices is high prices,” says Hank Smith, chief investment officer at Haverford Trust, an investment management firm in Radnor, Pennsylvania.

Other analysts agree that the worst may be in the rearview mirror. “Oil prices have likely found a near-term floor as production appears to be finally rolling over,” says Jason Pride, director of investment strategy at Glenmede, an investment and wealth management firm in Philadelphia.

Smith says the low prices of energy stocks represent a buying opportunity, particularly for large companies such as Exxon and Chevron. “Those stocks were beaten down so much and the yield was so generous that we couldn’t ignore and not add to them. When we added, Exxon was yielding over 4 percent and Chevron was 5 percent, and they have consistently paid dividends over many decades and increased their dividends over that time. That is through those dramatic swings in the price of oil. If we’re right and these stocks and oil prices gain in 2016, you’re going to look back and happy that you were a buyer,” Smith says.

Here are three stocks that could offer value in the current beaten-down environment.

Exxon Mobil Corp. (ticker: XOM) is scheduled to release third-quarter earnings on Oct. 30, and the S&P Capital IQ EPS consensus stands at 91 cents per share. “That compares to third quarter 2014, when they earned $1.89 per share,” Glickman says. “There are several names that look to be tremendously beaten down from where they have traded historically that are worth consideration.” S&P Capital IQ has “buy” rating on Exxon.

Valero Energy Corp. (VLO) is to report earnings on Oct. 28. The S&P Capital IQ EPS consensus estimate stands at $2.60 per share, which is up from year-ago results at $2, Glickman says. S&P Capital IQ has a strong buy on Valero, which is managing to buck the trend of weaker earnings due to its position as a refiner that benefits from cheaper oil prices. Refiners purchase crude oil and then turn it into finished products including diesel fuel, jet fuel, heating oil and more. Valero is well-positioned geographically due its strong presence in the Gulf Coast. “That is a key place to be for refiners amid a growing export market,” Glickman says.

Ultra Petroleum Corp. (UPL) is on the calendar for an Oct. 29 earnings release. S&P Capital IQ consensus projects 17 cents earnings per share. “Ultra’s natural gas assets in Wyoming and its recently acquired oil assets in Utah offer some of the best economics in the business over a full cycle, thanks to favorable pricing dynamics and low development and production costs. With a combined 20-plus years of drilling inventory to work through, Ultra should be able to continue generating solid growth and returns over the next decade and beyond,” says Mark Hansen, strategist at Morningstar, an independent investment research firm in Chicago.

As the lower energy prices impact and decrease production levels, the natural cycle in commodities could result in a trend toward higher crude oil prices over the next several years. Looking at the earnings outlook, S&P Capital IQ projects energy stock company earnings to return to positive territory. “We see an uptick, which is second-half loaded, with an overall increase of 2.5 percent in 2016,” Glickman says.

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Do Ugly Quarterly Earnings Represent a Turning Point for Energy Stocks? originally appeared on usnews.com