In this piece, we will take a look at the ten cheap oil stocks under $10.
The decision by OPEC+ to cut production in order to keep oil prices up created controversy earlier this month when the decision was heavily criticized by Washington. Oil prices have touched record levels this year in the aftermath of the Russian invasion of Ukraine, and if there is anything that analysts can agree on it is that the world needs more oil.
The journey of a barrel of oil from its underground and underwater reserves to the end consumer is filled with many stages, such as analytics, exploration, production, refining, and transportation. All these segments are served by countless firms, and research covering the industry as a whole and segment wise has optimistic growth estimates.
For instance, The Business Research Company estimates that the crude oil market was worth $1.35 trillion last year and it will grow by 4.2% this year to be worth $1.41 trillion by the end of the year. From then to 2025, growth will slow down to sit at a compounded annual growth rate of 1%, with the market being worth $1.47 trillion by the end of the forecast period. It pegs this growth to the increase in demand from China and India and outlines that new technologies such as high performance drill bits, pumps, and imaging equipment is making the job of the exploration and production companies much easier than before.
Valuates Reports narrows down its focus to take a look at the oil and gas analytics market. It believes that this sector, which focuses on using natural language processing to gauge the regulatory environment, predictive analytics to determine when equipment might break down, and uses simulations to monitor rigs, was worth $13 billion in 2020. From then to 2027 it will grow at a strong CAGR of 20.1% and be worth $48 billion at the end of the forecast period.
Today’s piece looks at some cheap oil stocks that are performing well and have long-term growth potential, and the top performers in our list are Kosmos Energy Ltd. (NYSE:KOS), Transocean Ltd. (NYSE:RIG), and Equitrans Midstream Corporation (NYSE:ETRN).
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Our Methodology
We took a broad look at the oil industry and then identified its different segments to sift out the firms that are operating in each sector. The companies were then briefly analyzed through their financials and market performance, following which they were ranked through Insider Monkey’s Q2 2022 survey of 895 hedge funds. These stocks are trading under $10 as of October 25.
10 Cheap Oil Stocks Under $10
10. Aemetis, Inc. (NASDAQ:AMTX)
Number of Hedge Fund Holders: 5
Aemetis, Inc. (NASDAQ:AMTX) is an ethanol, biodiesel, and biogas company that is headquartered in Cupertino, California, the United States. The firm sells its products to retailers, distributors, and oil refining companies and it serves the markets of the United States and India.
Aemetis, Inc. scored a big win in September 2022 when it announced that it had secured $7 billion worth of fuel supply contracts to airline companies. The companies include some of the largest in the world, such as Cathay Pacific, British Airways, Delta Airlines, and American Airlines. The contract with Cathay Pacific itself is worth $3 billion, and the complete deal will see the firm provide 916 million gallons of fuel.
Aemetis, Inc.’s second quarter results saw the firm post $66 million in revenue for a 20% annual growth. Out of the 895 hedge funds part of Insider Monkey’s Q2 2022 survey, five had held a stake in the company.
Aemetis, Inc.’s largest investor is Todd J. Cantor’s Encompass Capital Advisors which owns 1.8 million shares that are worth $9 million.
Aemetis, Inc. joins our list of cheap oil stocks, alongside Transocean Ltd., Kosmos Energy Ltd., and Equitrans Midstream Corporation.
9. Ring Energy, Inc. (NYSE:REI)
Number of Hedge Fund Holders: 9
Ring Energy, Inc. (NYSE:REI) is an oil and gas company that is headquartered in The Woodlands, Texas. The firm has close to 80 million barrels of oil equivalent reserves, and it has leases of tens of thousands of acres of oil fields across the United States.
Ring Energy, Inc. is slated to generate $127 million in cash flow by the end of 2023, and by reducing its capital expenditure for the fourth quarter, the firm is also in a position to reduce its net debt to $440 million by 2022 end. If WTI oil price were to stay at $78, the company’s revenue for 2023 sits at a respectable $440 million, which is equal to its net debt reading as well.
Ring Energy, Inc. also aims to sell as much as 19,000 barrels of oil equivalent per day during the current quarter, and slightly increase this next year. As part of their second quarter of 2022 holdings, nine out of the 895 hedge fund portfolios scanned by Insider Monkey had invested in the firm.
Ring Energy, Inc.’s largest investor is John Overdeck and David Siegel’s Two Sigma Advisors which owns 1.6 million shares that are worth $4.3 million.
8. Independence Contract Drilling, Inc. (NYSE:ICD)
Number of Hedge Fund Holders: 10
Independence Contract Drilling, Inc. (NYSE:ICD) is a contract drilling company that provides its services to other firms for drilling oil and gas. The firm owns several rigs and is headquartered in Houston, Texas, the United States.
Independence Contract Drilling, Inc. is on the road to expansion and the firm is aiming to add eight more rigs to its portfolio by the end of 2023. It is focusing on improving its operating efficiencies as well and saw the revenue per day grow by 5% between this year’s first and second quarters. Additionally, not only does Independence Contract Drilling, Inc. have a strong backlog but 36% of its backlog is fixed at a rate of $32,000 per day for next year – which is already higher than today’s rates.
Independence Contract Drilling, Inc.’s enterprise value to free cash flow ratio of 1.23 makes it the cheapest firm in its peer group. As this year’s second quarter ended, ten out of the 895 hedge funds polled by Insider Monkey had invested in the company.
Out of these, Marc Lisker, Glenn Fuhrman, and John Phelan’s MSDC Management is Independence Contract Drilling, Inc.’s largest investor. It owns 1.6 million shares that are worth $5.2 million.
7. VAALCO Energy, Inc. (NYSE:EGY)
Number of Hedge Fund Holders: 10
VAALCO Energy, Inc. (NYSE:EGY) explores, develops, and produces crude oil and natural gas. The company’s facilities are located in the West African regions of Equatorial Guinea and Gabon. It is based in Houston, Texas, the United States.
VAALCO Energy, Inc. has one of the strongest balance sheets in the industry, through covered and current ratios of 892 and 0.95. Both of these measure the ability of a company to pay back its obligations, and both show that the firm is on a strong footing. The firm’s price to earnings ratio of 3.49 also makes it one of the cheapest in its peer group.
VAALCO Energy, Inc.’s low P/E ratio comes despite the fact that the firm’s shares have appreciated by 63% year to date. To further make it an attractive cheap oil stock, VAALCO Energy, Inc. also pays a 3 cent dividend for a 2.36% yield. Insider Monkey’s June quarter of 2022 survey highlighted that ten out of 895 hedge funds owned a stake in the company.
VAALCO Energy, Inc.’s largest investor is Jim Simons’ Renaissance Technologies which owns 1.4 million shares that are worth $9.8 million.
6. National Energy Services Reunited Corp. (NASDAQ:NESR)
Number of Hedge Fund Holders: 14
National Energy Services Reunited Corp. (NASDAQ:NESR) is an oilfield services provider that lets companies cement their wells, conduct fractioning, use drilling systems, and test the output from their wells. The company is headquartered in Houston, Texas, the United States.
National Energy Services Reunited Corp. is expanding its portfolio and industry presence, as the firm announced in July this year that it will acquire the minority stakes, with the option to convert to the majority, in an oil field mapping company. The company also grew its manufacturing footprint in the United Arab Emirates earlier this year, in the form of a $169 million contract with a five year life. The deal comes under the UAE’s efforts to churn out 5 million barrels of oil per day by 2030.
National Energy Services Reunited Corp.’s latest win in 2022 however came in September 2022, when the company was awarded a long term contract for directional drilling in Saudi Arabia. Insider Monkey’s Q2 2022 survey covering 895 hedge funds outlined that 14 had bought the company’s shares.
Out of these, Todd J. Kantor’s Encompass Capital Advisors is National Energy Services Reunited Corp.’s largest investor. It owns 3.5 million shares that are worth $24 million.
Kosmos Energy Ltd., Transocean Ltd., and Equitrans Midstream Corporation are met by National Energy Services Reunited Corp. in our list of cheap oil stocks priced under $10.
5. Helix Energy Solutions Group, Inc. (NYSE:HLX)
Number of Hedge Fund Holders: 15
Helix Energy Solutions Group, Inc. (NYSE:HLX) is an energy company that provides well management, production, and robotics services to the energy industry. These include site inspection, flowline installation, and maintenance of production structures.
Helix Energy Solutions Group, Inc. is forecast to generate $40 million in operating income this year and grow this to $50 million next year. The firm grew its well intervention rate by 30% to sit at 45% in its second quarter, and its Siem Helix 2 project in Brazil saw a whopping utilization rate of 99% during the same time period. The robotics segment grew operating income by 553% sequentially in Q2, with average utilization of 94%.
Piper Sandler set an Overweight rating for the shares and a $7 price target for Helix Energy Solutions Group, Inc. in October 2022, stating that strong free cash flows next year will boost the overall industry. Insider Monkey took a look at 895 hedge funds during this year’s June quarter to determine that 15 had owned a stake in the company.
Helix Energy Solutions Group, Inc.’s largest investor is William B. Gray’s Orbis Investment Management which owns 2.4 million shares that are worth $7.4 million.
4. Berry Corporation (NASDAQ:BRY)
Number of Hedge Fund Holders: 19
Berry Corporation (NASDAQ:BRY) is involved in both exploring for and producing oil and managing and closing down wells. The company is headquartered in Dallas, Texas, the United States.
Berry Corporation posted $110 million in operating income during the second quarter, which marked a strong 52% annual increase. The company also aims to maintain its current oil production this year, which will prove easy since 90% of its oil comes from existing production fields – saving it from the tedious process of securing new permits and installing new equipment.
Jefferies set a $10 share price target for the company in October 2022, as it shared that a constrained capital cycle will aid the energy industry’s value. By the end of this year’s second quarter, 19 out of the 895 hedge funds polled by Insider Monkey had held a stake in Berry Corporation.
Out of these, Howard Marks’s Oaktree Capital Management is Berry Corporation’s largest investor. It owns 11.6 million shares that are worth $88 million.
3. Kosmos Energy Ltd. (NYSE:KOS)
Number of Hedge Fund Holders: 25
Kosmos Energy Ltd. is an oil and gas exploration company that produces oil from the Gulf of Mexico, Senegal, Ghana, and Equatorial Guinea. The firm is headquartered in Dallas, Texas, the United States.
Kosmos Energy Ltd. is investing heavily in production, and it expects its Tortue, Jubilee Southeast, and Winterfell assets to add as much as 50% to its production capacity by 2024. Kosmos Energy Ltd.’s field in Ghana produced 74,000 barrels of oil daily in its second quarter, and its Jubilee Southeast field delivered another 90,000 barrels.
Kosmos Energy Ltd. also strengthened its balance sheet in the second quarter by reducing $400 million in net debt. Berenberg increased its share price target to $8.5 from $8.3 in August 2022, stating that the firm has a bright future. As this year’s second quarter ended, 25 out of the 895 hedge funds polled by Insider Monkey had invested in the company.
Kosmos Energy Ltd.’s largest investor is D.E. Shaw’s D E Shaw which owns 10.5 million shares that are worth $65 million.
2. Equitrans Midstream Corporation (NYSE:ETRN)
Number of Hedge Fund Holders: 28
Equitrans Midstream Corporation is a midstream oil and gas company that gathers, transports, and stores the fuels. It has more than a thousand fuel lines and is based in Canonsburg, Pennsylvania, the United States.
Equitrans Midstream Corporation is aiming to bring in $1.05 billion in operating income this year, after raising the guidance and providing investors with assurance in the aftermath of weak results for 2022’s first half. However, despite the stale performance, the firm focused on its balance sheet in H1 2022, and it managed to reduce its net debt to $6.734 billion.
Equitrans Midstream Corporation also pays a 15 cent dividend for a 7.42% yield. Insider Monkey’s Q2 2022 survey of 895 hedge funds revealed that 28 had held a stake in the company.
Equitrans Midstream Corporation’s largest investor is Stuart J. Zimmer’s Zimmer Partners which owns 21 million shares that are worth $139 million.
Steel City Capital mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
The Partnership began acquiring shares in late June / early July when ETRN was trading around $6.00. As a general matter, I disdain using DCF for valuation purposes, as it’s a silly exercise that involves a lot of bullshit guessing about the future. But there are exceptions to every rule, and ETRN is one of them. This is a business that is fairly simple to model. Certain volumes are contractually set. Non-contractual volumes should continue flowing even in a depressed natural gas price environment (and today’s price environment is anything but weak). And prices for volumes are known variables (again, with a significant portion being contractually set.. (Click here to read more)”
1. Transocean Ltd. (NYSE:RIG)
Number of Hedge Fund Holders: 28
Transocean Ltd. provides drilling services for oil and gas wells. The company owns close to forty drilling units, with the portfolio made up of offshore drilling units and deep water and harsh environment floaters. It is based in Steinhausen, Switzerland.
Transocean Ltd.’s fleet status report as of October 2022 saw firm demand for the company’s products as the growing global demand for oil kept its orders busy. The company outlined that it had secured $1.6 billion worth of awards that saw it engage with seven different customers. This also enabled Transocean Ltd.’s backlog to grow to $7.3 billion for an 18% annual increase.
Crucially, Transocean Ltd. might benefit from increased dayrates as soon as next year, with executives in the industry expecting the rates to cross $500,000. Insider Monkey’s 895 hedge fund survey for this year’s second quarter saw 28 investors in the company.
Out of these, D.E. Shaw’s D E Shaw is Transocean Ltd.’s largest shareholder. It owns 24.5 million shares that are worth $81 million.
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This article is originally published at Insider Monkey.
