In this article, we will take a look at 10 best cheap oil stocks to buy in 2021. You can skip our comprehensive analysis of the global oil market and industry trends and go directly to the 5 Best Cheap Oil Stocks To Buy in 2021.
For the past several years, the oil industry has seen enormous growth in demand and revenue. However, the coronavirus crisis hammered the industry as demand crashed, production plants shuttered and the market saw a supply glut that have no precedents. According to an article published in Deloitte, oil demand is forecasted to rebound strongly in 2021. However, it will still be 4% lower than pre-COVID-19 in the base case.
The Association of Petroleum Exporting Countries (OPEC) is a 13-country intergovernmental organization founded in 1960 by its first five founders, the Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. In 2020, OPEC held 79.1% of the world’s proven oil reserves. In 2021, according to the latest Short Term Energy Outlook (STEO), OPEC sales are expected to rise marginally to $397 billion due to a larger output as global demand increases and a rise in crude oil prices.
Saudi Arabia is one of the most notable members of the OPEC member nations. In 2019, the country generated nearly 9.8 million barrels of crude oil, accounting for almost a quarter of OPEC’s total production of 29.4 million barrels. In 2019, Saudi Arabian oil giant Aramco (ARAMCO: AB) listed on the Riyadh stock exchange, hit a record-breaking initial public offering (IPO) as the world’s biggest share sale. The $25.6 billion raised by the company exceeded the previous high set in 2014 by Alibaba Group Holding Limited (NYSE:BABA), China’s e-commerce platform. In 2020, Aramco’s net income came in at $49 billion, one of the biggest profit margins of a publicly traded firm worldwide.
The COVID-19 Effect on the Giants of the Oil Industry
Oil is the world’s most significant energy source. Major oil companies deliver billions of barrels of petroleum products daily to global economies. However, the COVID-19 pandemic took a toll on many industries, and the oil industry was not immune to this. According to data collected by Anadolu Agency from the financial reports, the combined revenue of the world’s top 14 publicly traded oil profits fell 35.4% in 2020.
In the same year, industry leaders like Royal Dutch Shell plc (NYSE:RDS-A) sales dropped record-breaking. The company’s sales in 2020 came in at $183.2 billion, down 48% from $352.1 billion in 2019. Oil giant Chevron Corporation’s (NYSE:CVX) sales and other operating revenues in the fourth quarter of 2020 were $25 billion, down $10 billion compared to $35 billion in 2019.
Rise of the Oil Industry in the United States
The United States is one of the largest oil-producing countries globally, with over 17 million barrels per day in 2020. According to a worldwide management consulting firm, Mckinsey and Company, the US Lower 48 onshore production is expected to grow from 7.9 million barrels per day in 2020 to 8.7 million barrels per day in 2021. The completion of excess drilled but uncompleted (DUC) inventory is estimated to account for most demand, while the remainder will develop from new drilling operations.
The growth of the oil sector is triggering many oil players to enter the public market. Vine Energy Inc. (NYSE: VEI), funded by The Blackstone Group Inc. (NYSE: BX), is one of the newest petroleum companies in the market today. The California-based hydrocarbon exploration company Vine Energy Inc. (NYSE: VEI), founded in 2014, develops natural gas properties in Haynesville and Mid-Bossier shale plays in the Haynesville of Northwest Louisiana. In March 2021, the company held its initial public offering (IPO) at $14 per share, raising $301 million. Shares of VEI soared 17% over the last five days. Vine Energy Inc. will release its Q1 2021 financial results on May 17.
Independence Contract Drilling, Inc. (NYSE: ICD) is one of the newest providers of premium land-based contract drilling services for oil and natural gas in the United States. The company held its initial public offering (IPO) in 2014, where the firm sold 10,000,000 shares of common stock at $11 per share. Shares of Independence Contract Drilling, Inc. (NYSE: ICD) rose 11% over the last five days. In 2020, the company’s total revenue came in at $83.4 million.
The California-based energy company, Berry Corporation (NASDAQ: BRY) covers around 8,701 net acres. In 1990, Berry Corporation (NASDAQ: BRY) acquired a 40-year-old abandoned pipeline from Chevron Corporation (NYSE: CVX). However, three years later, the pipeline leaked, resulting in an oil spill of around 84,000 gallons of heavy crude oil into McGrath Lake in California. The case was dismissed in 1997 after the company decided to settle a $3.2 million penalty. In 2018, the California-based company went public. Berry Corporation (NASDAQ: BRY) IPO sold about 10.5 million shares for $146.96 million. Today, the company is one of the biggest oil companies with operating income up 21% from 2019 to $1.2 billion.
Growth Catalysts for the Oil Industry
According to Research and Market, the global oil and gas demand is expected to increase at a 25.5% compound annual growth rate (CAGR) from $4677.45 billion in 2020 to $5870.13 billion in 2021. On top of this, the International Energy Agency (IEA) is optimistic given the gradual economic recovery, oil and gas demand will continue to rise. In 2021, global oil demand is expected to increase by 5.7 million barrels a day, reaching 96.7 million barrels per day.
Many oil penny stocks saw a boost in their share price in 2020—for instance, Texas-based Marathon Oil Corporation (NYSE:MRO). The hydrocarbon exploration owns a 91,000 net surface acre in the Permian Basin. On December 30, 2020, shares of MRO reached highs of $6.84, up 51% since their prior lows in April of $10.33. Texas-based Marathon Oil Corporation (NYSE:MRO). gained 116% over the last twelve months. Texas-based Marathon Oil Corporation (NYSE:MRO). said it plans to keep investment this year below $1 billion, regardless of how much oil rates rise, so the company can concentrate on repaying more than $500 million in increased debt. On April 23, Wolfe Research upgraded Marathon Oil to an Outperform rating from a Peer Perform rating, with a PT adjustment to $15 from $13.
Another penny stock that soared in 2020 is Viper Energy Partners LP (NASDAQ:VNOM). The Texas-based energy company acquires and exploits oil and natural gas in North America. Viper Energy Partners LP owns nearly 814,224 gross acres and 24,304 net royalty acres in the Permian Basin and Eagle Ford Shale. On November 17, 2020, shares of Viper Energy Partners LP (NASDAQ:VNOM) reached highs of $9.95, up 71% since their prior lows on April 23, 2021, of $17.02. The stock gained 112% over the last twelve months mainly due to the oil price rally and increased production. On April 7, Analyst firm Piper Sandler upgraded VNOM from Neutral to Overweight, with a price target of $17.00.
The oil industry isn’t the only sector that saw volatility after the pandemic. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26, 2021, our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017, and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here is our list of the best cheap oil stocks to buy in 2021.
Best Cheap Oil Stocks to Buy in 2021
10. Enable Midstream Partners LP (NYSE:ENBL)
Number of Hedge Fund Holders: 3
Total Value of Hedge Fund Holdings: $10.5 Million
Share Price as of April 28: $7.21
We start our list of the best cheap oil stocks to buy in 2021 with natural gas and crude oil developer Enable Midstream Partners LP (NYSE:ENBL). The company owns 15 main production plants with a 2.6 billion cubic feet per day (Bcf/d) capacity and 8 natural gas storage facilities with an 84.5 billion cubic feet storage capacity. In 2017, the company purchased Align Midstream, LLC, a midstream firm with natural gas gathering and refining facilities in the Cotton Valley and Haynesville plays of the Ark-La-Tex Basin for nearly $300 million. The acquisition includes 190 miles of natural gas gathering pipelines through Rusk, Panola, Shelby counties in Texas and DeSoto Parish in Louisiana, and a cryogenic natural gas production plant with 100 million cubic feet per day in Panola, Texas.
The company has a market cap of $2.97 billion and posted its net income of $88 million in 2020, a 77% decrease from $396 million in 2019. On April 27, 2020, shares of Enable Midstream Partners LP (NYSE:ENBL) reached highs of $3.81. The stock is up 83% since then. In March, Barclays analyst Christopher Tillett upgraded Enable Midstream Partners LP to Equal Weight from Underweight, with a price target of $7, up from $5.
There were 3 hedge funds that reported owning stakes in Enable Midstream Partners LP at the end of the fourth quarter, down from 4 hedge funds during the third quarter.
9. PHX Minerals Inc. (NYSE:PHX)
Number of Hedge Fund Holders: 6
Total Value of Hedge Fund Holdings: $6.01 Million
Share Price: $2.29
PHX Minerals Inc. (NYSE:PHX) ranks 9th on the list of best cheap oil stocks to buy in 2021. The Oklahoma-based energy company operates around 253,000 net mineral acres located in Oklahoma, North Dakota, Texas, New Mexico, and Arkansas. The company recently closed an $11,947,000 in cash and stock deal with three minerals and royalty companies to acquire 2,698 net royalty acres in the Southern SCOOP. The acquisition also includes 103 gross proved developed producing (PDP) wells, 17 gross wells in progress, and 613 gross undrilled sites.
PHX Minerals Inc. (NYSE:PHX) has a market cap of $64.2 billion. PHX Minerals Inc. revenue came in at $29 million in 2020, down from $66 million in 2019. The company offers a dividend yield of 1.79%. On April 27, 2020, shares of PHX reached highs of $3.6. The stock is down 36% since then. PHX ranks 9th in the list of best cheap oil stocks to buy in 2021.
There were 6 hedge funds that reported owning stakes in PHX Minerals Inc. at the end of the fourth quarter. The total value of these stakes at the end of Q4 is $6.01 million.
8. W&T Offshore, Inc. (NYSE:WTI)
Number of Hedge Fund Holders: 11
Total Value of Hedge Fund Holdings: $14.3 Million
Share Price: $3.04
W&T Offshore, Inc. (NYSE:WTI) is one of the earliest energy companies in the Gulf of Mexico. The company has been engaged in the discovery, production, and acquisition of oil and natural gas since 1983. On top of its leadership, the company also owns around 737,000 gross acres across the US Gulf of Mexico. In 2019, the company closed a $20.0 million deal with ConocoPhillips (NYSE:COP) for 75% working interest and operatorship of the Magnolia Field in the central area of the deepwater Gulf of Mexico (“GOM”), offshore Louisiana, at Garden Banks blocks 783 and 784. WTI ranks 8th in the list of best cheap oil stocks to buy in 2021.
W&T Offshore, Inc. (NYSE:WTI) has a market cap of $443.9 million and revenue of $347 million in the full year of 2020. On April 17, Roth Capital analyst John White upgraded W&T Offshore from Neutral to Buy, with a $3.80 price target. On April 27, 2020, shares of W&T Offshore, Inc. (NYSE:WTI) reached highs of $2.6. The stock is up 14% since then.
There were 11 hedge funds that reported owning stakes in W&T Offshore, Inc. (NYSE:WTI) at the end of the fourth quarter, up from 8 funds a quarter earlier. The total value of these stakes at the end of Q4 is $14.3 million.
7. Helix Energy Solutions Group, Inc. (NYSE:HLX)
Number of Hedge Fund Holders: 11
Total Value of Hedge Fund Holdings: $14.3 Million
Share Price as of April 28 $4.19
Helix Energy Solutions Group, Inc. (NYSE:HLX) is the leading operator of offshore well intervention and remotely operated vehicle (ROV) activities for new and developing oil and gas fields. On April 1, Helix Energy Solutions Group, Inc. received a Neutral ranking from analyst BTIG.
Helix Energy Solutions Group, Inc. NYSE:HLX) has a market cap of $676 million. The company’s revenue in the fourth quarter of 2020 came in at $160 million. Shares of HLX jumped 179% over the past twelve months. HLX ranks 7th in the list of best cheap oil stocks to buy in 2021.
There were 11 hedge funds that reported owning stakes in Helix Energy Solutions Group, Inc. (NYSE:HLX) at the end of the fourth quarter, down from 14 funds a quarter earlier. The total value of these stakes at the end of Q4 is $14.3 million.
6. Enerplus Corporation (NYSE:ERF)
Number of Hedge Fund Holders: 17
Total Value of Hedge Fund Holdings: $94.5 Million
Share Price as of April 28: $5.22
Calgary, Canada-based Enerplus Corporation (NYSE:ERF) ranks 6 in our list of the best cheap oil stocks to buy in 2021. The company is the largest independent oil and gas producer in Canada, with over 66,440 net acres on the Fort Berthold Indian Reservation. In March 2021, the company agreed to buy Hess Corporation’s (NYSE:HES) Little Knife and Murphy Creek acreage rights in the Bakken shale in North Dakota’s Williston basin in a $312 million deal.
Enerplus Corporation (NYSE:ERF) has a market cap of $1.12 billion. The company’s revenue in 2020 came in at $632 million. The company offers a dividend yield of 1.85%. Shares of EF jumped 141% over the past twelve months. On July 7, BMO Capital kept Enerplus Corporation an Outperform and lowered the price target to $6. ERF ranks 6th in the list of best cheap oil stocks to buy in 2021.
There were 17 hedge funds that reported owning stakes in Enerplus Corporation (NYSE:ERF) at the end of the fourth quarter. The total value of these stakes at the end of Q4 is $94.5 million.
Click to continue reading and see the 5 best cheap oil stocks to buy in 2021
- Top 10 Restaurant Stocks Under $10
- 12 Best Value Dividend Stocks to Buy Now According to Warren Buffett
- 10 Best Vaccine Stocks to Buy Now
Disclosure: None. 10 best cheap oil stocks to buy in 2021 is originally published on Insider Monkey.