10 Best Cheap Oil Stocks to Buy in 2021

Published on May 3, 2021 at 10:18 am by Ma’k Almario in Hedge Funds, News

In this article, we will take a look at 10 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.

5. Southwestern Energy Company (NYSE:SWN)

Number of Hedge Fund Holders: 21
Total Value of Hedge Fund Holdings: $148 Million
Share Price as of April 28: $4.25

Texas-based natural gas developer Southwestern Energy Company ranks five on the list of 10 best cheap oil stocks to buy in 2021. The company owns over 786,000 net acres in the Appalachia Basin. In 2020, the company purchased Montage Resources, an oil and gas company, in a $193 million deal. The acquisition resulted in over $30 million in general and administrative (G&A) synergies and retaining balance sheet resilience by stock market investments.

The company has a market cap of $2.6 billion. Shares of SWN surged 24.52% over the past twelve months. The company’s revenue in 2020 came in at $2.3 billion, a $700 million decrease compared to 2019 revenue. On April 23, Raymond James downgraded the stock from a “Market Perform” to an “Underperform.” At the same time, Morgan Stanley increased their price target on Southwestern Energy shares from $4.50 to $5.00.

4. Comstock Resources, Inc. (NYSE:CRK)

Number of Hedge Fund Holders: 22
Total Value of Hedge Fund Holdings: $87.1 Million
Share Price as of April 28: $5.23

Comstock Resources, Inc. ranks 4th on the list of 10 best cheap oil stocks to buy in 2021. The company owns around 309,000 net acres in the Haynesville and Bossier shale deposits that can yield natural gas. On March 15, Piper Sandler analyst Kashy Harrison downgraded Comstock Resources from Overweight to Neutral, with a $6.00 price target.

The company has a market cap of $1.11 billion and a revenue of $858 million in the full year of 2020. There were 22 hedge funds that reported owning stakes in Comstock Resources, Inc. at the end of the fourth quarter, down from 24 funds a quarter earlier. The total value of these stakes at the end of Q4 is $87.1 million.

3. Cenovus Energy Inc. (NYSE:CVE)

Number of Hedge Fund Holders: 23
Total Value of Hedge Fund Holdings: $238 Million
Share Price as of April 28: $7.51

Canada-based Cenovus Energy Inc. ranks 3rd on the list of 10 best cheap oil stocks to buy in 2021. The company owns oil sand ventures in Northern Alberta and oil exploration areas in Alberta and British Columbia. In 2020, the company entered into a $23.6 billion partnership with Husky Energy Inc, an integrated energy company, to create a leader in the integrated energy sector.

The company has a market cap of $19.0 billion. The stock has gained 146% in the last twelve months. Cenovus Energy Inc.’s revenue in 2020 came in at $9.87 billion. In March 2021, JPMorgan analyst Phil Gresh raised Cenovus Energy to Neutral from Underweight, with a price target of $13. According to the analyst, a Brent oil price in the $60s is a “sweet spot” for the Integrated Oils market, allowing demand to bounce back from COVID-19 while capital development is sustained. The collaboration resulted in cost and capital synergies of $1.2 billion, increased free funds flow production, and supported an investment-grade credit profile.

There were 23 hedge funds that reported owning stakes Cenovus Energy Inc. at the end of the fourth quarter, up from 18 funds a quarter earlier. The total value of these stakes at the end of Q4 is $238 million.

L1 Capital mentioned that they see great strategic value in the combination of high-quality and low-cost oil sands and heavy oil reserves with substantial midstream and downstream facilities following Cenovus Energy Inc.’s acquisition of Husky Energy in its Q4 2020 investor letter:

“Cenovus Energy (long +49%) is an integrated energy company that develops, produces and markets crude oil, natural gas liquids and natural gas, primarily in Canada. Cenovus shares rose as the oil prices continued to recover and as discounts for their production compared to the WTI price narrowed, driving strong free cash flow generation in Q4 after very weak Q2 and Q3 performance. We increased our shareholding after Cenovus announced the acquisition of Husky Energy in late October 2020, to create the third largest Canadian oil and natural gas producer. We see strong strategic merit in the combination which unites high-quality and low-cost oil sands and heavy oil assets with extensive midstream and downstream infrastructure. The transaction should be highly accretive and lead to substantial synergies, increased scale, more stable cash generation and reduced group leverage.”

Cenovus Energy Inc (USA) (NYSE:CVE)

2. Range Resources Corporation (NYSE:RRC)

Number of Hedge Fund Holders: 25
Total Value of Hedge Fund Holdings: $194 Million
Share Price as of April 28: $9.74

Range Resources Corporation (NYSE:RRC) ranks 2nd in our list of 10 best cheap oil stocks to buy in 2021. The energy company is a Marcellus Shale explorer and Pennsylvania’s most prolific natural gas drillers. In 2020, the company sold its Northern Louisiana assets to Terryville upstream for $245 million, plus contingent payments based on commodity prices. According to the terms of the contract, Range will keep midstream obligations for the duration of the contract.

Range Resources Corporation (NYSE:RRC) has a market cap of $1.96 billion and in the fourth quarter of 2020, the company’s revenue came in at $598.9 million. Shares of RRC climbed 60% over the past twelve months. On April 23, Raymond James Downgrades Range Resources to Underperform.

There were 25 hedge funds that reported owning stakes in Range Resources Corporation at the end of the fourth quarter, down from 23 funds a quarter earlier. The total value of these stakes at the end of Q4 is $194 million.

Range Resources Corp. (NYSE:RRC)

1. Falcon Minerals Corporation (NASDAQ:FLMN)

Number of Hedge Fund Holders: 26
Total Value of Hedge Fund Holdings: $30.2 Million
Share Price as of April 28: $4.52

Topping the 10 best cheap oil stocks to buy in 2021 is Falcon Minerals Corporation (NASDAQ:FLMN). The oil and gas minerals company owns over 256,000 gross unit acres in the Eagle Ford Shale and Austin Chalk in Karnes, DeWitt, and Gonzales Countries in Texas. In March 2021, Falcon Minerals Corporation (NASDAQ:FLMN) stock sold higher after Wells Fargo upgraded the stock from Equal-Weight to Overweight with an $8 price target.

The company has a market cap of $382 million. Falcon Minerals Corporation (NASDAQ:FLMN) revenue in the full year 2020 came in at $38.9 million. There were 26 hedge funds that reported owning stakes in Falcon Minerals Corporation at the end of the fourth quarter, up from 20 funds a quarter earlier. The total value of these stakes at the end of Q4 is $30.2 million.

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You can also take a peek at Tiger Cub Billionaire Stephen Mandel’s Top 10 Stock Picks and David Einhorn’s Top 10 Stock Picks.

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