Crude oil prices have largely risen over the past year on the back of supply cuts and the Russia-Ukraine war; Not surprisingly, this has given oil shares a strong boost. But some of those companies are starting to look expensive, according to David Sekera, Morningstar’s chief U.S. market strategist, who said there is another corner of the sector that offers opportunities instead. “We do most of the thinking [exploration and production] companies, while entering the year undervalued, are up around 30% year to date. And we think they̵[ads1]7;re pretty much fairly, maybe even a little bit overvalued, at this point,” he told Pro Talks last week. Exploration and production companies search for and extract oil in the upstream segment of the business. Crude prices have been somewhat volatile on the latest. While they dipped below $100 in early June, prices have since climbed back above $100. Still, both Brent and WTI are more than 60% higher than where they were a year ago. The S & P 500 Energy Index is also up about 50% over the same period. Stock Picks Sekera said investors should now consider the energy services business, where he says Morningstar “still sees value today for investors.” He singled out three stocks in this area: Schlumberger, NOV Inc. (formerly National Oilwell Varco), and Halliburton Read more These ‘top of the food chain’ stocks are the best names you can buy, says investor Forget Tesla – buy these electric car-related stocks instead, says Morningstar strategist ‘Outright cheap’ : JPMo rg an says there is a tactical buying opportunity in these global stocks “We also believe in the midstream that many of the pipelines are still undervalued. So those would be the two areas that … maybe take a look at for undervaluation,” Sekera told CNBC Pro Talks. In its third-quarter outlook report, Morningstar elaborated on its stock picks in the energy sector, saying investors can now get Schlumberger “for a bargain .” “We expect industry activity to recover from COVID-19, with long-term activity in international markets (where Schlumberger focuses) even exceeding pre-pandemic levels. We believe Schlumberger will continue its historical record of leading peers in technology advancement and generating high returns on capital,” the report says. Schlumberger last traded at $33.13, below Morningstar’s fair value of $49. The Morningstar report also named ExxonMobil a top pick, trading at $86.10, below its fair value of $96. It noted that Exxon has said it plans to double earnings by 2025 from 2019 levels. Exxon estimated that under this plan it would generate about $100 billion in excess cash over the next five years — after capital expenditures and dividend payments. “This combination of potential earnings growth and cash returns is unmatched elsewhere in the sector,” the report said.