In this article, we discuss 10 cheap oil stocks to buy today.
With WTI crude oil prices topping $120 per barrel as recently as mid-June, concerns over rising interest rates and a potential U.S. recession brought crude prices below $100 in mid-July. A number of investors are concerned that the oil industry could be in for a repeat of the 2008 and 2009 scenarios, where oil prices soared to all-time highs only to collapse when the U.S. economy took a hit. Although the global market and political environment has contributed to the rise in inflation, they also brought oil stocks back into the limelight on Wall Street. Despite the global push toward renewable energy, oil and natural gas investments are on the rise since the global transition to green energy will need the help of fossil fuels to meet soaring energy demand. According to the Short-Term Energy Outlook (STEO) presented by the U.S. Energy Information Administration (EIA), OPEC crude oil production is expected to rise by 2.4 million b/d to an average of 28.7 million b/d in 2022, and will further increase to 29.3 million b/d in 2023. Additionally, U.S. crude oil production is forecast to average around 12.8 million b/d in 2023, which would set a record for most U.S. crude oil production in a year.
Russia’s invasion of Ukraine has sent oil, natural gas, coal and other commodity prices soaring, creating an earnings tail wind for many energy sector stocks. Since Russia is a leading oil-producing country, sanctions placed by the United States and Europe would have a huge impact on global oil prices. According to the World Bank, energy prices are expected to rise by 50% in 2022. In a global situation where inflation and geopolitical tensions have played their part in destabilizing the post-pandemic recovery, it seems like investors have found a beacon of hope as they stand to gain much from oil and gas companies’ increasing earnings.
For those who cannot afford some of the pricier oil stocks on the market, there are several cheaper alternatives that offer the same growth potential but at lower prices. Some of the cheap oil stocks to buy include BP p.l.c. (NYSE:BP), Kinder Morgan, Inc. (NYSE:KMI), and Halliburton Company (NYSE:HAL), among others listed below.
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Our Methodology
For this list, we have selected companies that operate in the oil sector and are trading at relatively cheap prices compared to peers. The business fundamentals and analyst ratings for these firms are also discussed to provide readers with some additional context for their investment choices. All the stocks listed below are priced under $30 per share as of July 28.
The hedge fund sentiment around each stock was derived from Insider Monkey’s database which tracks more than 900 hedge funds as of Q1 2022.
10 Cheap Oil Stocks to Buy Today
10. Vermilion Energy Inc. (NYSE:VET)
Number Of Hedge Fund Holders: 18
Share Price as of July 28: $24.97
Vermilion Energy Inc. (NYSE:VET) is an international oil and gas producer based in Calgary, Canada, that provides production programs focusing on acquisition, exploration, development and optimization in North America, Europe and Australia.
Earlier this June, Scotiabank analyst Jason Bouvier upgraded Vermilion Energy Inc. (NYSE:VET) to Outperform from Sector Perform with a C$36 price target, citing its exposure to European gas prices and improving relative valuation. According to Bouvier, WTI prices have fallen from their recent high and Vermilion’s share price has fallen roughly in line with its peer group over the past couple of weeks, but this means that the relative valuation “has improved materially” given that European gas prices have risen by about 50% during this same time frame and Vermilion Energy Inc. (NYSE:VET) derives about 40%-45% of its cash flow from European gas prices.
At the end of the first quarter of 2022, 18 hedge funds in the database of Insider Monkey held stakes worth $152.7 million in Vermilion Energy Inc. (NYSE:VET), compared to 14 in the previous quarter worth $98 million. Among the hedge funds being tracked by Insider Monkey, John Overdeck and David Siegel’s Two Sigma Advisors is a leading shareholder in Vermilion Energy Inc. (NYSE:VET), with 1.52 million shares worth more than $32 million.
Similar to BP p.l.c. (NYSE:BP), Kinder Morgan, Inc. (NYSE:KMI), and Halliburton Company (NYSE:HAL), Vermilion Energy Inc. (NYSE:VET) is a cheap option that investors can look into to take advantage as energy prices rise to new highs.
9. Enterprise Products Partners L.P. (NYSE:EPD)
Number Of Hedge Fund Holders: 19
Share Price as of July 28: $26.41
Enterprise Products Partners L.P. (NYSE:EPD) is an American midstream natural gas and crude oil pipeline company with headquarters in Houston, Texas. It operates as a provider of midstream energy services to producers and consumers of natural gas, crude oil, refined products and petrochemicals.
In Q1 2022, Enterprise Products Partners L.P. (NYSE:EPD) reported $1.8 billion in distributable cash flow, up from $1.7 billion year-over-year. Its cash flow from operations stood at $2 billion, compared with $1.9 billion in the first quarter of 2021.
Truist analyst Neal Dingmann raised the price target on Enterprise Products Partners L.P. (NYSE:EPD) to $30 from $27 and kept a Buy rating on the shares earlier this May. The analyst cited the company’s “outsized” Q1 earnings beat and its new growth project set announced at analyst day. Dingmann added that he is “constructive” on Enterprise Products units on the forward opportunity tied to the leverage of an enhanced Permian system in the current environment.
As of the quarter ended in March, 19 hedge funds in Insider Monkey’s database owned stakes in Enterprise Products Partners L.P. (NYSE:EPD), down from 21 in the previous quarter. The consolidated value of these stakes is over $177.5 million. With stakes worth $84.5 million, First Eagle Investment Management was the company’s leading shareholder in Q1.
ClearBridge Investments mentioned Enterprise Products Partners L.P. (NYSE:EPD) in its Q1 2022 investor letter. Here is what the firm has to say:
“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names (including) Enterprise Products Partners LP. We are positive on this company’s strong balance sheets, competitive positions and exposure to an economic recovery.”
8. Magnolia Oil & Gas Corporation (NASDAQ:MGY)
Number Of Hedge Fund Holders: 22
Share Price as of July 28: $23.35
Magnolia Oil & Gas Corporation (NASDAQ:MGY) is an oil and natural gas company that is engaged in the acquisition, development, exploration, and production of oil, natural gas, and natural gas liquid (NGL) reserves. Its oil and natural gas properties are located primarily in Karnes County and the Giddings area in South Texas, where it targets the Eagle Ford Shale and Austin Chalk formations.
On July 20, MKM Partners analyst Leo Mariani assumed coverage of Magnolia Oil & Gas Corporation (NASDAQ:MGY) with a Buy rating and $26 price target as part of a broader research note on Exploration & Production names. While the oil market has been quite tenuous of late, WTI oil prices should stay above $100 as long as the war in Ukraine is ongoing, the analyst tells investors in a research note. The analyst is also positive on the company’s “high per share production growth, upside potential in the Austin Chalk play, best in class balance sheet and strong, consistent returns of capital to shareholders.”
The number of hedge funds tracked by Insider Monkey owning stakes in Magnolia Oil & Gas Corporation (NASDAQ:MGY) grew to 22 in Q1 2022, from 20 in the previous quarter. The collective value of these stakes is roughly $276.26 million, as compared with $184 million worth of stakes held by hedge funds in Q4 2021. Amy Minella’s Cardinal Capital is the company’s leading shareholder, with a stake worth $93.3 million.
Here is what Wasatch Ultra Growth Fund has to say about Magnolia Oil & Gas Corporation (NASDAQ:MGY) in its Q1 2022 investor letter:
“Another strong stock in the Fund was Magnolia Oil & Gas Corp. (NASDAQ:MGY). Operating primarily in oil-rich South Texas, the company engages in the development, exploration and production of oil and natural gas. Sharply higher prices for oil and gas boosted Magnolia’s share price during the first quarter. We’re impressed by the company’s disciplined management team and consistent record of returning cash to shareholders regardless of the price of oil.”
7. Enerplus Corporation (NYSE:ERF)
Number Of Hedge Fund Holders: 22
Share Price as of July 28: $13.72
Enerplus Corporation (NYSE:ERF) is one of Canada’s largest independent oil and gas producers. The company holds oil and natural gas property interest in the United States and in western Canada.
This past June, Scotiabank analyst Jason Bouvier upgraded Enerplus Corporation (NYSE:ERF) to Outperform from Sector Perform with a price target of C$25, up from C$20. The analyst increased his average target price in his Canadian Energy coverage by 17% as the industry continues to see significant tailwinds in commodity prices, though Bouvier added “not everything is rosy.” He believes that the robust commodity price environment, continued capital discipline, and strengthening balance sheets outweigh the headwinds the industry is facing.
At the end of the first quarter of 2022, 22 hedge funds in the database of Insider Monkey held stakes worth $300.34 million in Enerplus Corporation (NYSE:ERF), up from 19 in the previous quarter worth $259.86 million. Among the hedge funds being tracked by Insider Monkey, Boston-based firm Adage Capital Management is a leading shareholder in Enerplus Corporation (NYSE:ERF), with 9.14 million shares worth more than $116.14 million.
6. Comstock Resources, Inc. (NYSE:CRK)
Number Of Hedge Fund Holders: 25
Share Price as of July 28: $15.85
Comstock Resources, Inc. (NYSE:CRK) is an independent energy company that engages in the acquisition, exploration, development, and production of oil and natural gas primarily in North Louisiana and East Texas.
On July 21, Citi analyst Paul Diamond initiated coverage of Comstock Resources, Inc. (NYSE:CRK) with a Buy rating and $17 price target. The company’s production growth and “lateral improvements” present opportunities for relative operational outperformance, Diamond tells investors in a research note.
On May 3, the firm posted earnings for the first quarter of 2022, reporting earnings per share of $0.51, in line with market expectations. The revenue over the period was $524 million, beating estimates by $68 million.
At the end of the first quarter of 2022, 25 hedge funds in the database of Insider Monkey held stakes worth $116 million in Comstock Resources, Inc. (NYSE:CRK), up from 19 in the preceding quarter worth $92 million. Among the hedge funds being tracked by Insider Monkey, New York-based firm DE Shaw is a leading shareholder in Comstock Resources, Inc. (NYSE:CRK), with 4 million shares worth more than $52 million.
Much like BP p.l.c. (NYSE:BP), Kinder Morgan, Inc. (NYSE:KMI), and Halliburton Company (NYSE:HAL), Comstock Resources, Inc. (NYSE:CRK) is one of the oil stocks that hedge funds are buying.
5. BP p.l.c. (NYSE:BP)
Number Of Hedge Fund Holders: 27
Share Price as of July 28: $28.47
BP p.l.c. (NYSE:BP) is a London-based energy firm which offers biofuels, natural gas, and de-carbonization solutions and services, along with solar and wind power generation facilities.
On July 20, CGG announced a major multi-year global data transformation and curation agreement with BP p.l.c. (NYSE:BP), that will play a key role in supporting BP’s Subsurface digital strategy. Piper Sandler analyst Ryan Todd raised the price target on BP p.l.c. (NYSE:BP) to $44 from $42 and kept an Overweight rating on the shares. According to the analyst, the setup for the stocks is “increasingly attractive into the quarter on account of recession fears having taken a toll on both refining and integrated oil stocks.
As of the end of the first quarter, 27 out of 900+ elite hedge funds tracked by Insider Monkey held positions in BP p.l.c. (NYSE:BP) with a combined value of $1.86 billion. In comparison, 26 hedge funds held combined stakes worth $1.2 billion in the energy firm a quarter ago. Boston-based investment firm Arrowstreet Capital was the largest shareholder of BP p.l.c. (NYSE:BP) in Q1 2022 with 25.56 million shares valued at more than $751.63 million.
4. Southwestern Energy Company (NYSE:SWN)
Number Of Hedge Fund Holders: 35
Share Price as of July 28: $6.97
Southwestern Energy Company (NYSE:SWN) is a natural gas exploration and production company organized in Delaware and headquartered in Spring, Texas. It engages in the exploration, development, and production of natural gas, oil, and natural gas liquids in the United States, and operates through two segments: Exploration & Production, and Marketing.
On July 21, Citi analyst Paul Diamond upgraded Southwestern Energy Company (NYSE:SWN) to Buy from Neutral with an $8 price target after assuming coverage of the name. The analyst named Southwestern as his top pick among the gas-centric exploration and production companies. According to Diamond, the company’s geographic diversification provides relative operational flexibility, while its “conservative” hedge profile “somewhat constrains the upside.” He expects the company’s leverage and debt targets to be hit well ahead of schedule and sees opportunities for relative outperformance from its operational optionality between Haynesville and Appalachia.
At the end of Q1 2022, 35 hedge funds were bullish on Southwestern Energy Company (NYSE:SWN) and held stakes worth $516.68 million in the company. This is compared to 24 positions in the prior quarter with stakes worth $255.41 million.
Greenlight Capital shared its outlook on Southwestern Energy Company (NYSE:SWN) in its Q1 2022 investor letter. Here is what the firm said:
“SWN is the second largest producer of natural gas in the U.S. The company is well-situated to satisfy growing domestic and export demand. Over the short, medium and long term, Europe now intends to reduce its reliance on Russian energy and increase its use of U.S. LNG. Based on its 2021 year-end reserves – which assumed a $3.60/MMBtu long-term natural gas price – SWN has a PV-104 value of $13.83 per share. By the end of the first quarter, the U.S. natural gas 5-year forward curve averaged $4.28/MMBtu, while international seaborne LNG was close to $20/MMBtu. Over the intermediate term, with the benefit of substantial global investment in infrastructure, we expect prices for U.S. and international natural gas to converge. We acquired our shares at an average price of $6.58. SWN shares ended the quarter at $7.17.”
3. Baker Hughes Company (NASDAQ:BKR)
Number Of Hedge Fund Holders: 39
Share Price as of July 28: $24.98
Baker Hughes Company (NASDAQ:BKR) is an American international industrial service company and one of the world’s largest oil field services companies. The company provides the oil and gas industry with products and services for oil drilling, formation evaluation, completion, production and reservoir consulting.
RBC Capital analyst Keith Mackey lowered the price target on Baker Hughes Company (NASDAQ:BKR) to $36 from $41 but maintained an Outperform rating on the shares on July 21. The company’s Q2 results were below expectations as headwinds in Russia compounded existing supply chain constraints, the analyst tells investors in a research note. Mackey adds, however, that he continues to see long-term value in Baker Hughes Company (NASDAQ:BKR) shares as the LNG cycle progresses and with its oilfield businesses remaining an “important catalyst”.
According to Insider Monkey’s Q1 2022 database, 39 hedge funds reported owning stakes in Baker Hughes Company (NASDAQ:BKR), valued at $936.1 million. In the previous quarter, 35 hedge funds held a $747.8 million worth of stake in the Texas-based company.
Here is what Carillon Eagle Mid Cap Growth Fund has to say about Baker Hughes Company (NASDAQ:BKR) in its Q1 2022 investor letter:
“Baker Hughes (NYSE:BKR), a diversified energy technology and equipment company, is currently seeing a number of tailwinds across its numerous lines of business. In the near term, the company should benefit from the recovery in oil field capital expenditure. In the intermediate term, it also should be able to benefit from the build-out of liquefied natural gas infrastructure to assist European nations in their efforts to reduce their reliance on Russian natural gas. Additionally, Baker Hughes offers carbon capture technologies to help customers meet lofty climate-friendly targets.”
2. Kinder Morgan, Inc. (NYSE:KMI)
Number Of Hedge Fund Holders: 40
Share Price as of July 28: $18.04
Kinder Morgan, Inc. (NYSE:KMI) is one of the largest energy infrastructure companies in North America that specializes in owning and controlling oil and gas pipelines and terminals. It operates through four business segments: Natural Gas Pipelines, Products Pipelines, Terminals, and CO2.
Earlier this April, Wells Fargo analyst Michael Blum upgraded Kinder Morgan, Inc. (NYSE:KMI) to Equal Weight from Underweight with a price target of $21, up from $19, to reflect higher assumed multiples for refined products assets in his sum-of-the-parts valuation. Although the analyst still views Kinder Morgan, Inc. (NYSE:KMI) as a defensive midstream company, he believes the company could benefit from a number of tailwinds on account of surging inflation, oil prices hovering around $100/Bbl, and robust demand for natural gas/LNG.
On July 20, Kinder Morgan, Inc. (NYSE:KMI) announced its financial results for the second fiscal quarter of 2022, posting an EPS of $0.27, in-line with the estimates. The $5.15 billion revenue surpassed market consensus forecasts by $1.27 billion.
At the end of Q1 2022, 40 hedge funds were bullish on Kinder Morgan, Inc. (NYSE:KMI) with stakes worth $1.34 billion. This is compared to 39 positions in the previous quarter with stakes worth $998.85 million. The hedge fund sentiment for the stock is positive.
1. Halliburton Company (NYSE:HAL)
Number Of Hedge Fund Holders: 47
Share Price as of July 28: $28.64
Halliburton Company (NYSE:HAL) is an American multinational corporation that operates as one of the largest oil field service companies, with operations in more than 70 countries. The company exceeded Street forecasts for Q2 EPS and revenue, reporting the largest quarterly profit in about four years as it sold almost the entire equipment inventory in the North American market.
JPMorgan analyst Arun Jayaram sees an attractive risk/reward on Halliburton Company (NYSE:HAL) into the Q2 print on July 5. He sees earnings upside in North America as well as “emerging optionality” to the company’s international footprint and lifted his Q2 and second half of 2022 estimates to reflect a positive view of pricing gains in recent months, while maintaining an Overweight rating on the company’s shares with a $50 price target.
According to the Q1 database of Insider Monkey, 47 hedge funds were bullish on Halliburton Company (NYSE:HAL), up from 43 funds in the earlier quarter. Richard S. Pzena’s Pzena Investment Management featured as the leading stakeholder of the company, with 22.7 million shares worth $862.2 million.
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Disclosure. None. 10 Cheap Oil Stocks to Buy Today is originally published on Insider Monkey.
