Energy
5 Well-Known Energy Stocks Under $10 With Huge Upside Potential
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While most of Wall Street focuses on large and mega-cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. Many of the biggest public companies, especially the technology giants, trade in the hundreds, all the way up to over $1,000 per share or more. At those steep prices, it’s pretty hard to get any decent share count leverage.
Many investors, especially more aggressive traders, look at lower-priced stocks as a way to not only make some good money but to get a higher share count. That can really help the decision-making process, especially when you are on to a winner, as you can always sell half and keep half.
We screened our 24/7 Wall St. research database looking for energy stocks that are likely to survive the current troubles and could very well offer investors some huge returns over the next year or so. With oil still trading near the $40 a barrel level, these could be great ideas for aggressive investors.
While all five stocks are rated Buy at top Wall Street firms, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Comstock Resources
This stock has made a solid move off the lows but still has plenty of upside. Comstock Resources Inc. (NYSE: CRK) engages in the acquisition, development and exploration of oil and natural gas. This independent energy company operates primarily in the Haynesville shale, a premier natural gas basin located in East Texas and North Louisiana with economics and geographical proximity to the Gulf Coast markets.
Estimates for the company have been moving higher. The consensus for the third quarter has been increased to $0.01 per share from $0.00 per share, and the full-year estimate for next year has been raised to $0.71 per share from the previous consensus forecast of $0.69 per share. This consensus estimate is based on nine publicly distributed estimates incorporated in the current third quarter consensus estimate and nine for the full year 2021 estimate.
Citigroup has an $8 price target on the shares, while the Wall Street consensus target is slightly higher at $8.65. Shares slipped below $6 level this past week.
Energy Transfer
The top master limited partnership (MLP) could be a safe way for investors looking for energy exposure and income. Energy Transfer L.P. (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all the major domestic production basins.
This publicly traded limited partnership has core operations that include complimentary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGLs) and refined product transportation and terminaling assets; NGL fractionation; and various acquisition and marketing assets.
Through its ownership of Energy Transfer Operating, formerly known as Energy Transfer Partners, the company also owns Lake Charles LNG, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco, and the general partner interests and 39.7 million common units of USA Compression Partners.
Investors receive an incredible 18.60% distribution, which appears to be safe for now. The BofA Securities price objective is a massive $12, and the consensus figure is $10.56. Energy Transfer stock traded mostly above $6.50 last week.
24/7 Wall St.Oceaneering International
This deepwater driller and contrarian play could have potential as a takeover target. Oceaneering International Inc. (NYSE: OII) is a global provider of engineered services and products, primarily to the offshore oil and gas industry, with a focus on deepwater applications. With its applied technology expertise, Oceaneering also serves the defense, entertainment and aerospace industries.
The services and products it provides to the oil and gas industry include remotely operated vehicles, specialty subsea hardware, engineering and project management, subsea intervention services, including manned diving, survey and positioning services and asset integrity and nondestructive testing services. The company serves the defense, aerospace and commercial theme park industries.
Goldman Sachs is positive on the cost-cutting measures put in place and noted this recently:
Additional cost-cutting initiatives remain on the table into the back-half of 2020 and 2021. Although we believe that offshore activity levels are likely to remain low for the remainder of the year and into 2021, the company has demonstrated the ability to protect margins and maintain market share in the most severe downturn in recent history, which provides comfort around FCF and weathering the near-term storm.
The $10 Goldman Sachs price objective is well above the $6.39 consensus estimate. Oceaneering International stock ended the week near $5 a share.
Plains All American Pipeline
This remains a top MLP pick across Wall Street. Plains All American Pipeline L.P. (NYSE: PAA) is primarily engaged in midstream crude oil activities, including transportation, gathering, marketing and terminaling.
Top analysts, including the Goldman Sachs team, feel the company deserves a premium valuation given its leverage to the Permian and attractive organic growth backlog. The company owns an extensive network of pipeline transportation, terminaling, storage and gathering assets in key crude oil and NGL producing basins and transportation corridors and at major market hubs in the United States and Canada. On average, Plains All American handles more than 6 million barrels per day of crude oil and NGL in its Transportation segment.
Goldman Sachs said this recently about the company:
We continue to expect the company’s Permian footprint of gathering, intra-basin, and long-haul pipelines to benefit from the basin’s lower breakeven production costs relative to most other US shale plays, driving a quicker recovery in production as commodity prices increase and thus throughput on the company’s system.
Investors still receive a solid 9.76% distribution. Goldman Sachs has set an $11 price objective. The consensus target price is $12.04, but Plains All American Pipeline stock closed shy of $7.30 on Friday.
WPX Energy
This is a smaller capitalization energy company with solid upside potential and is yet another top Permian Basin play. WPX Energy Inc. (NYSE: WPX) is an independent oil and natural gas exploration and production company engaged in the exploitation and development of unconventional properties in the United States. Besides the Permian Basin, its principal areas of operation include the Williston Basin in North Dakota and the San Juan Basin in New Mexico and Colorado.
WPX is a premier Permian-levered operator with sector-leading debt-adjusted cash flow growth supported by strong execution in the core Delaware, all while trading at a Williston Basin valuations, primarily due to its relatively high financial leverage.
After a solid second quarter, the BofA Securities analysts said this:
Second quarter 2020 adjusted EBITDA of $400 million was ahead of expectations; production above estimates, capex lower. Completions to resume in the second half. 2020 capex trimmed with exit volume unchanged (140 Mb/d); 2021 sustaining capex outlook unchanged. Operational momentum (new completion design), opportunistic hedges and solid free-cash-flow outlook ($200 million in 2020).
BofA Securities analysts have a $10 price target. The consensus price objective is $8.88. WPX Energy stock retreated below $6 late last week.
These five companies have all been sent to the single-digit midget penalty box. Some of them may have a difficult road back to prosperity, but given what we have seen in the past, and the massive liquidity that Washington, D.C., is providing, the odds are good that each survives this downturn and could head much higher in the rest of the year with an increase in the benchmark pricing of oil.
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