In this article, we discuss 10 undervalued and cheap energy stocks to buy now.
The world is facing an energy crisis. The energy slump is impacting Europe’s economy heavily, even before winter sets in. Industrial users could need to ration oil and gas if reserves prove insufficient. Europe is facing the brunt of the energy crisis as it rallies to cut reliance on Russian oil and gas, which was previously the largest source of energy for the majority of the European countries.
Germany, the largest European economy, is facing tough industrial sentiment owing to the energy crisis. Germany’s finance ministry wants to increase government loans for energy firms, setting up a fund worth about $68 billion to support the energy providers. The government is also willing to support businesses and consumers with skyrocketing energy bills. For now, the EU’s price caps on Russian gas have been halted, in fear of greater retaliation from the largest exporter of natural resources right before winter. While Germans brace for a harsh winter as the country moves energy supply from Russian gas, German Chancellor Olaf Scholz said:
“Of course we knew, and we know, that our solidarity with Ukraine will have consequences.”
According to the US Energy Information Administration, the OPEC members will collectively rake in $842 billion in revenues from oil exports in 2022, which is a record-high amount for the group since 2014. Compared to 2021, OPEC revenues in 2022 will climb 50% higher. The revenue increase this year is attributed to higher production and soaring crude oil prices. However, global oil inventories will accumulate in 2023, which will lead prices lower.
In the current macro environment, the energy crisis will boost energy firms globally, who can charge higher prices and still see elevated demand. The shift from Russian oil and gas in Europe is also a growth catalyst for energy firms with ties to Europe. Due to high volatility, investors are hesitant to spend exorbitant amounts in the stock market and buy the likes of Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), and Exxon Mobil Corporation (NYSE:XOM). However, it is a wise play to consider undervalued and cheap energy stocks to gain from the boom in the sector.
Photo by Zbynek Burival on Unsplash
Our Methodology
We selected energy stocks with a P/E ratio of under 20 and a price cap of $25 as of September 13. Growth fundamentals, positive analyst coverage, dividend history, and robust financials were classifiers for selection as well.
We have arranged the list according to the hedge fund sentiment around the securities, which was assessed from Insider Monkey’s Q2 2022 database of about 900 elite hedge funds.
Undervalued and Cheap Energy Stocks to Buy Now
10. Black Stone Minerals, L.P. (NYSE:BSM)
Number of Hedge Fund Holders: 5
P/E Ratio as of September 13: 13.27
Share Price as of September 13: $16.18
Black Stone Minerals, L.P. (NYSE:BSM) was founded in 1876 and is based in Houston, Texas. The company has oil and natural gas mineral interests throughout the United States. Priced at about $16.2, with a P/E ratio of 13.27 as of September 13, Black Stone Minerals, L.P. (NYSE:BSM) is one of the notable undervalued and cheap energy stocks to buy now.
On August 1, the company reported solid Q2 results, posting a GAAP EPS of $0.59 and a revenue of $180.37 million, outperforming market estimates by $0.21 and $41.52 million, respectively. Revenue over the period gained 208.6% on a year over year basis. Black Stone Minerals, L.P. (NYSE:BSM)’s distributable cash flow in 2023 is forecasted at $510 million based on the current strip. In Q2 2022, the dividend paid to shareholders increased 5% from the prior quarter at $0.40 per share.
According to Insider Monkey’s data, 5 hedge funds were bullish on Black Stone Minerals, L.P. (NYSE:BSM) at the end of June 2022, compared to 6 funds in the last quarter. Murray Stahl’s Horizon Asset Management is a prominent stakeholder of the company, with 192,749 shares worth $2.6 million.
Like Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), and Exxon Mobil Corporation (NYSE:XOM), Black Stone Minerals, L.P. (NYSE:BSM) is one of the energy stocks to consider to benefit from the boom in the sector.
9. Obsidian Energy Ltd. (NYSE:OBE)
Number of Hedge Fund Holders: 7
P/E Ratio as of September 13: 4.21
Share Price as of September 13: $8.49
Obsidian Energy Ltd. (NYSE:OBE) is headquartered in Calgary, Canada, focused on the exploration and development of oil and natural gas properties in the Western Canada Sedimentary Basin. On July 28, Obsidian Energy Ltd. (NYSE:OBE) reported a Q2 FFO of $1.86. The company posted strong Q2 average production of 31,575 boe/d, an increase of 28% compared to 2021. It remains one of the top undervalued and affordable energy stocks to consider.
On August 3, Stifel analyst Cody Kwong reiterated a Buy rating on Obsidian Energy Ltd. (NYSE:OBE) but lowered the price target on the stock to C$19 from C$19.50.
According to Insider Monkey’s data, Obsidian Energy Ltd. (NYSE:OBE) was part of 7 hedge fund portfolios at the end of Q2 2022, with collective stakes worth $12 million, compared to the same number of funds in the prior quarter worth $23 million. Jim Simons’ Renaissance Technologies is the biggest position holder in the company, with 715,972 shares worth $5.53 million.
8. Evolution Petroleum Corporation (NYSE:EPM)
Number of Hedge Fund Holders: 13
P/E Ratio as of September 13: 11.55
Share Price as of September 13: $6.93
Evolution Petroleum Corporation (NYSE:EPM) is based in Houston, Texas, operating as an oil and natural gas company. The company has development projects and royalty interests in Northeast Louisiana, Wyoming, and North Texas. Evolution Petroleum Corporation (NYSE:EPM)’s management recently went on a buying spree that seemed to approximately quadruple production. The company’s latest news release on August 8 suggests that it lowered debt by $15.7 million during the quarter to end with $21.3 million outstanding and $8.3 million in cash balance.
On July 12, Northland analyst Donovan Schafer assumed coverage of Evolution Petroleum Corporation (NYSE:EPM) with an Outperform rating and a price target of $8.60. The company’s differentiated business model makes it “an attractive way to play the macro oil and gas environment near-to mid-term,” while offering some risk mitigation, the analyst told investors. The stock’s price performance since 2004 has been greatly correlated with oil prices, but “importantly, with positive deviations where it counts,” the analyst added.
According to Insider Monkey’s data, 13 hedge funds were bullish on Evolution Petroleum Corporation (NYSE:EPM) at the end of Q2 2022, compared to 14 funds in the last quarter. John Overdeck and David Siegel’s Two Sigma Advisors is a notable shareholder of the company, with 283,527 shares worth $1.5 million.
Here is what Steel City Capital has to say about Evolution Petroleum Corporation (NYSE:EPM) in its Q1 2022 investor letter:
“Evolution Petroleum Corporation (NYSE: EPM): EPM is a small oil & gas company that owns a portfolio of diversified oil, natural gas, and NGL producing properties. EPM is atypical in the sense that it specifically focuses on non-operating working & revenue interests of producing assets that are in the twilight years of their lives. These assets require fairly minimal capital and have steady, predictable production profiles. Historically, EPM was a less attractive single-asset business, owning only a 23.9%/26.2% working/revenue interest in Denbury’s Delhi field, which is predominantly an oil asset. In recent years, however, management has meaningfully diversified, adding a total of four additional production assets to its portfolio. Pro-forma for its most recent acquisitions, EPM’s production mix is 43% oil, 40% natural gas, and 17% NGL. One of the more important factors that attracted me to EPM was management’s philosophy to operate an unhedged book1 . I subscribe to the school of thought that 1) years of underinvestment in upstream projects has resulted in a structural supply deficit that should be supportive of pricing for some time and 2) commodity exposure is an important hedge against rising inflation. Shares trade at an EV/EBITDA multiple in the mid-2x range and offer a mid-single-digit dividend yield.”
7. Dorian LPG Ltd. (NYSE:LPG)
Number of Hedge Fund Holders: 15
P/E Ratio as of September 13: 6.49
Share Price as of September 13: $14.67
Dorian LPG Ltd. (NYSE:LPG) is a Connecticut-based company that engages in the transportation of liquefied petroleum gas worldwide. On August 3, Dorian LPG Ltd. (NYSE:LPG) declares an irregular cash dividend of $1.00 per share. The dividend was distributed to shareholders on September 2. The company is positioned to exhibit significant growth amid a rebounding and rising VLGC market, which makes it one of the best undervalued and cheap energy stocks to buy now.
On July 20, Jefferies analyst Omar Nokta initiated coverage of Dorian LPG Ltd. (NYSE:LPG) with a Buy rating and a $20 price target. The VLGC segment where Dorian LPG Ltd. (NYSE:LPG) operates has benefited meaningfully from the U.S. becoming the biggest exporter of LPG, said the analyst. He observed that the company has historically captured charter rate averages on the higher end of market index averages.
Among the hedge funds tracked by Insider Monkey, 15 funds were long Dorian LPG Ltd. (NYSE:LPG) at the end of June 2022, with collective stakes worth $88.6 million. Michael Lowenstein’s Kensico Capital is the largest position holder in the company, with 2.8 million shares valued at $43 million.
6. Crescent Point Energy Corp. (NYSE:CPG)
Number of Hedge Fund Holders: 19
P/E Ratio as of September 13: 3.31
Share Price as of September 13: $7.28
Crescent Point Energy Corp. (NYSE:CPG) is a Canadian firm that explores and develops light and medium crude oil, natural gas liquids, and natural gas reserves in Western Canada and the United States. On July 26, Crescent Point Energy Corp. (NYSE:CPG) declared a C$0.08 per share quarterly dividend, a 23.1% increase from its prior dividend of C$0.07. The dividend will be distributed on October 3, to shareholders of record as of September 15. With a P/E ratio of 3.31 and shares priced at $7.28 as of September 13, Crescent Point Energy Corp. (NYSE:CPG) is one of the best undervalued and cheap energy stocks to buy now.
On July 28, National Bank analyst Travis Wood maintained an Outperform rating on Crescent Point Energy Corp. (NYSE:CPG) and lowered the price target on the shares to C$20 from C$21.
According to the second quarter database of Insider Monkey, 19 hedge funds were bullish on Crescent Point Energy Corp. (NYSE:CPG), compared to 18 funds in the last quarter. D E Shaw is the largest stakeholder of the company, with 6.60 million shares worth about $47 million.
In addition to Chevron Corporation (NYSE:CVX), ConocoPhillips (NYSE:COP), and Exxon Mobil Corporation (NYSE:XOM), Crescent Point Energy Corp. (NYSE:CPG) is one of the energy stocks on the radar of elite hedge funds.
5. Magnolia Oil & Gas Corporation (NYSE:MGY)
Number of Hedge Fund Holders: 22
P/E Ratio as of September 13: 6.32
Share Price as of September 13: $23.58
Magnolia Oil & Gas Corporation (NYSE:MGY) is a Texas-based company specializing in the acquisition, development, and production of oil, natural gas, and natural gas liquids reserves in the United States. On August 2, the company reported a Q2 GAAP EPS of $1.32, exceeding consensus estimates by $0.15. The revenue climbed 93.3% year over year to $484.65 million, topping market forecasts by $25.05 million. Magnolia Oil & Gas Corporation (NYSE:MGY) also declared a $0.10 per share dividend, which was paid on September 1.
MKM Partners analyst Leo Mariani on July 20 assumed coverage of Magnolia Oil & Gas Corporation (NYSE:MGY) with a Buy rating and a $26 price target as part of a broader research note on Exploration & Production names. The analyst remained 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”.
According to Insider Monkey’s Q2 data, 22 hedge funds were long Magnolia Oil & Gas Corporation (NYSE:MGY), with combined stakes worth $177.2 million. Amy Minella’s Cardinal Capital is the leading position holder in the company, with 3.85 million shares worth about $81 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.”
4. Comstock Resources, Inc. (NYSE:CRK)
Number of Hedge Fund Holders: 25
P/E Ratio as of September 13: 16.86
Share Price as of September 13: $20.06
Comstock Resources, Inc. (NYSE:CRK) was incorporated in 1919 and is headquartered in Frisco, Texas. It is an independent energy company focusing on the acquisition, exploration, and production of oil and natural gas mainly in North Louisiana and East Texas. On August 1, Comstock Resources, Inc. (NYSE:CRK) posted a Q2 Non-GAAP EPS of $1.00 and a revenue of $946.25 million, outperforming market consensus by $0.05 and $318.45 million, respectively. It is a notable cheap and undervalued energy stock to consider in the current market backdrop.
On September 13, Stifel analyst Derrick Whitfield raised the price target on Comstock Resources, Inc. (NYSE:CRK) to $27 from $22 and reaffirmed a Buy rating on the shares. The analyst added the stock to the firm’s “Select List” after Comstock Resources, Inc. (NYSE:CRK)’s Q2 earnings and a detailed technical review of its Western Haynesville area. The analyst sees Comstock Resources, Inc. (NYSE:CRK) as “the best vehicle to express a bullish view on the convergence of U.S. and international natural gas prices” given its expanding resource base and advantaged proximity relative to the Gulf Coast.
Among the hedge funds tracked by Insider Monkey, 25 funds were long Comstock Resources, Inc. (NYSE:CRK) at the end of June 2022, with combined stakes worth $144 million. D E Shaw is the largest stakeholder of the company, with more than 4 million shares worth $50 million.
3. Enerplus Corporation (NYSE:ERF)
Number of Hedge Fund Holders: 25
P/E Ratio as of September 13: 7.15
Share Price as of September 13: $15.60
Enerplus Corporation (NYSE:ERF) is a Canadian company engaged in the exploration and development of crude oil and natural gas in the United States and Canada. The firm’s properties are located primarily in North Dakota, Colorado, Pennsylvania, Alberta, British Columbia, and Saskatchewan. With shares worth $15.60 as of September 13, and a price to earnings ratio of 7.15, Enerplus Corporation (NYSE:ERF) is one of the top undervalued and cheap energy stocks to buy now.
On August 4, Enerplus Corporation (NYSE:ERF) declared a $0.05 per share quarterly dividend, a 16.3% increase from its prior dividend of $0.04. The dividend is payable on September 15, to shareholders of record on August 31.
Stifel analyst Cody Kwong raised the price target on Enerplus Corporation (NYSE:ERF) on August 8 to C$32 from C$30 and maintained a Buy rating on the shares.
According to Insider Monkey’s data, Enerplus Corporation (NYSE:ERF) was part of 25 hedge fund portfolios at the end of Q2 2022, up from 22 funds in the last quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is the largest stakeholder of the company, with 7.8 million shares worth $103.7 million.
2. Energy Transfer LP (NYSE:ET)
Number of Hedge Fund Holders: 36
P/E Ratio as of September 13: 9.64
Share Price as of September 13: $12.06
Energy Transfer LP (NYSE:ET) owns and operates natural gas transportation pipelines and natural gas storage facilities. The company also sells natural gas to electric utilities, independent power plants, and industrial users. Energy Transfer LP (NYSE:ET) provides crude oil transportation, middle distillate, motor fuels, and other petroleum products as well. It is one of the best undervalued and cheap energy stocks to buy.
On August 24, Energy Transfer LP (NYSE:ET) announced that it signed a 20-year agreement with Shell plc (NYSE:SHEL) to supply 2.1 million metric tons per year of liquefied natural gas from its Lake Charles LNG export project in Louisiana. The first deliveries are projected to begin as early as 2026. Energy Transfer LP (NYSE:ET) has been expanding vigorously this year, with plans to ultimately restart its earlier dividend distribution.
Barclays analyst Theresa Chen on August 16 raised the price target on Energy Transfer LP (NYSE:ET) to $14 from $13 and reaffirmed an Overweight rating on the shares. The analyst believes there are still unique tailwinds within the firm’s North American midstream and refining coverage and that U.S. refining fundamentals will continue to fare well.
According to Insider Monkey’s data, 36 hedge funds were long Energy Transfer LP (NYSE:ET) at the end of Q2 2022, up from 31 funds in the last quarter. David Abrams’ Abrams Capital Management is the leading stakeholder of the company, with more than 22 million shares worth $220.80 million.
Miller Value Partners, an investment firm, talked about Energy Transfer L.P. (NYSE:ET) in its Q2 2021 investor letter. Here is what the fund said:
“Energy Transfer LP (ET) rose over the period along with the price of oil climbing 40.59% over the period. The company received positive news that the Dakota Access Pipeline project would not be shut down while the Environmental Impact Statement by the US Army Corps of Engineers is drawn up. Energy Transfer reported strong 1Q results with revenue of $17B surpassing expectations for $11.8B with adjusted earnings before income, taxes, depreciation and amortization (EBITDA) hitting $5.04B ahead of consensus of $2.77B. The company raised full year adjusted EBITDA guidance to $12.9-13.3B from $10.6-11.0B previously, with the increase largely related to the benefits realized from Winter Storm Uri. The company paid down $3.7B in debt during the quarter, using strong cash flow to reduce leverage. The company also announced the issuance of $900M in 6.5% Series H perpetual preferreds with the company using the proceeds to repay debt and for general purposes.”
1. Cenovus Energy Inc. (NYSE:CVE)
Number of Hedge Fund Holders: 42
P/E Ratio as of September 13: 11.82
Share Price as of September 13: $18.67
Cenovus Energy Inc. (NYSE:CVE) is a Canadian energy firm that produces and markets crude oil, natural gas liquids, and natural gas in Canada, the United States, and the Asia Pacific. The company operates through Oil Sands, Conventional, Offshore, Canadian Manufacturing, U.S. Manufacturing, and Retail segments. On September 13, Cenovus Energy Inc. (NYSE:CVE) declared a C$0.105 per share quarterly dividend, in line with previous. The dividend is payable on September 29, to shareholders of record as of September 15.
On August 10, Credit Suisse analyst William Janela assumed coverage of Cenovus Energy Inc. (NYSE:CVE) with an Outperform rating and a price target of C$37.
According to Insider Monkey’s data, 42 hedge funds were bullish on Cenovus Energy Inc. (NYSE:CVE) at the end of the second quarter of 2022, compared to 44 funds in the last quarter. Eric W. Mandelblatt’s Soroban Capital Partners is the leading stakeholder of the company, with 50.3 million shares worth $957 million.
Here is what L1 Capital Long Short Fund Limited has to say about Cenovus Energy Inc. (NYSE:CVE) in its Q4 2021 investor letter:
“Detailed, bottom-up stock research remains the investment team’s primary focus and the core driver of portfolio performance. 2021 once again demonstrated the team’s ability to identify ‘winners’ through extensive company and industry research across a diverse range of sectors. Key contributors included Cenovus Energy, (due to) recovering oil price leading to improved investor sentiment, consensus earnings upgrades and strong free cash flow generation.”
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Disclosure: None. 10 Undervalued and Cheap Energy Stocks to Buy Now is originally published on Insider Monkey.
