Heading into earnings season, investors were bracing for a troubling round of quarterly reports in the energy sector. A sharp drop in crude oil prices in the past few months led to concerns that companies would report dismal outlooks for the quarters ahead.

Yet the bad news never arrived. Major oil companies, such as Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX), delivered upside surprises, and oil services firms, like Schlumberger Ltd (NYSE: SLB), also said that business conditions are holding up.

Still, a great deal of damage has been done in this sector. Outside of those aforementioned blue chips, many smaller energy-related stocks have fallen far from their 52-week high. One stock that I’ve had my eye on now appears set to deliver solid upside, has a game plan to protect against further downside and offers an impressive 7.2% dividend yield. It’s unloved now, but could be one of the best energy sector rebound plays of 2015. I’m talking about Noble Corp. (NYSE: NE).

Noble owns and leases massive drilling rigs, with a focus on both deepwater and shallow water offshore regions. The company spun off roughly half of its fleet, mostly older rigs, into a new company called Paragon Offshore Plc (NYSE: PGN) earlier this summer. The move now looks brilliant, as older, less efficient rigs now hold less appeal in a world of $80 oil. Shares of Paragon, which were priced at $12.50 a share, surged above $17 on the first day of trading (July 21, 2014), but they now trade for less than $5.

#-ad_banner-#Noble, for its part, now owns a modern fleet of drilling rigs, which are mostly locked into long-term contracts at solid daily lease rates. Management estimates that its fleet of rigs already has contracts for 72% of all “rig operating days” in 2015. As long as oil prices don’t sharply plunge from here and current global drilling plans remain intact, that metric should steadily rise in coming months.

Yet it’s the company’s shareholder-friendly, Total Yield strategy that really has my attention. Thanks to $1.4 billion in operating cash flow thus far in 2013 and an imminent reduction in capital spending requirements, the company recently announced plans to buy back 37 million shares, which would shrink the share count by 15%. The move “is a signal of our belief in the positive long-term outlook for offshore drilling and the improved competitive position that Noble now enjoys in our industry,” noted management upon the release of Q3 results.

Noble also noted the possible launch of a master limited partnership, or MLP, for investors that simply want to focus on dividend yields from the company’s robust cash flow. “NE’s fleet is well positioned for an MLP structure given that the company has several rigs on long-term contracts, which are suitable drop-down candidates,” note analysts at Clarkson Capital, adding that “NE remains one of the names of interest to us as a relative outperformance candidate within offshore drilling.” The timing for an MLP also appears right when you consider that Noble is wrapping up a four-year slate of heavy capital spending to build new, modern rigs, a process which should be complete in the next few quarters.

Yet yield seekers don’t need to wait for an MLP. Noble already offers a $1.50 annual dividend, which equates to a 7.3% yield.

The charm of the solid dividend and massive buyback is that they provide a defensive form of support to this stock. The buyback in particular would provide a source of buying supprt, even if outside shareholders choose to sell. That’s why shares are quite likely to stabilize at $20. Any move below that would simply lead to a stepped up volume of buybacks.

Another pillar of support: shares trade for just 65% of tangible book value. I love to see share buybacks whenever I see a number like that, as the math (a denominator that falls faster than a numerator) on a book value per share basis becomes ever more compelling.

Risks To Consider: Noble’s aggressive plan for buybacks and dividends isn’t without risk, as the company carries more than $4.5 billion in long-term debt. If oil prices fell sharply in 2015, then the company’s contracted backlog for 2016 and beyond would shrink sharply, and Noble may have trouble servicing its debt, making a robust dividend and buyback policy a foolish move in hindsight.

Action To Take –> This is a great investment if crude oil prices stay above $70. They appear to have stabilized in the $80 range, perhaps in anticipation of OPEC output cuts later this month. If oil prices remain stable in coming months, then look for this oversold stock to get fresh attention. A move back into the upper $20’s, representing more than 30% potential appreciation, is a feasible target. It’s rare that you can lock in such a high yield, along with the potential share price appreciation, combined with the downside safety that a massive share buyback and below book valuation bring. That makes Noble one of the most compelling opportunities in an oversold sector.

If oil, natural resources or commodities are what interests you, look no further than StreetAuthority’s Scarcity & Real Wealth. Our resident natural resources expert Dave Forest has more than a decade’s experience as a trained geologist and analyst. His industry insight allows him to read the markets and provide the most timely, potentially lucrative advice for everything from oil and gold to molybdenum. To gain access to Dave’s latest research, click here.