Energy
5 Energy Stocks Trading Under $10 With Huge October 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. Often the biggest public companies, especially the technology giants, trade in the low-to-mid hundreds, all the way up to over $1,000 per share. 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.
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Every week, we screen our 24/7 Wall St. research database looking for stocks with Buy equivalent ratings at major firms and priced under the $10 level (last week’s picks included Clear Channel Outdoor and Glu Mobile), and this week was no exception. We focused on the underperforming energy sector and found five new stocks that could provide investors with some solid upside potential. While more suited for aggressive accounts, they could prove exciting additions to portfolios looking for solid alpha potential.
Callon Petroleum
This is a small-cap stock that Northland Securities favors. Callon Petroleum Co. (NYSE: CPE) is an independent oil and natural gas company that is engaged in the exploration, development, acquisition and production of oil and natural gas properties. The company focuses on the acquisition and development of unconventional oil and natural gas reserves in the Permian Basin.
Callon’s drilling activity focuses on the horizontal development of various prospective intervals in the Midland Basin, including multiple levels of the Wolfcamp formation and the Lower Spraberry shale. The company made a huge $570 million acquisition of 29,000 net acres last May, which more than doubled its Delaware Basin footprint.
Merrill Lynch has a price target on the shares is $9, and the Wall Street consensus target is $8.68. The stock traded on Friday’s close at $3.93 a share.
Chesapeake Energy
This company has been in and out of the news often frequently the past 20 years, and its stock offers brave investors an incredible entry point. Chesapeake Energy Corp. (NYSE: CHK) is one of the largest U.S. companies engaging in the acquisition, exploration and development of properties for the production of oil, natural gas and natural gas liquids from underground reservoirs.
The company holds interests in natural gas resource plays, including the Marcellus in Northern Appalachian Basin in Pennsylvania; Haynesville in northwestern Louisiana; Eagle Ford in south Texas; Brazos Valley in southeast Texas; Powder River Basin in Wyoming; and Mid-Continent in the Anadarko Basin of northwestern Oklahoma. As of December 31, 2018, it owned interests in approximately 13,200 oil and natural gas wells, and it had estimated proved reserves of 1,448 million barrels of oil equivalent.
Morgan Stanley has a $2.50 price target, which is well above the $1.95 consensus target. Shares closed on Friday at $1.36 apiece.
24/7 Wall St.Gulfport Energy
This company has been one of the favorites around Wall Street among the smaller more nimble companies. Gulfport Energy Corp. (NASDAQ: GPOR) is an independent oil and natural gas exploration and production company with its principal producing properties located in the Utica Shale of Eastern Ohio and along the Louisiana Gulf Coast.
The company reported second-quarter net income of $235 million, or $1.47 per share. Adjusted earnings results exceeded Wall Street expectations. The independent oil and gas company posted revenue of $459 million in the period as well, also topping Street forecasts. Gulfport is scheduled to post third-quarter results at the end of this month.
The $6 Wells Fargo price target is shy of the $6.63 consensus figure. The stock was trading at $2.60 per share as Friday’s session came to a close.
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Jagged Peak Energy
Shares of this smaller energy company have sizable upside potential from current trading levels. Jagged Peak Energy Inc. (NYSE: JAG) is a Permian Basin oil and gas producer with 70,000 net acres in the Southern Delaware Basin in three operating areas.
Its largest position is held in Whiskey River (35,000 net acres), which is located in Reeves and Ward counties, followed by Big Tex (22,000 net acres), which is located in Pecos County, and Cochise (12,900 net acres), which straddles Ward and Winkler counties.
The stock has lagged this year, but SunTrust feels a turnaround could be imminent:
We believe Jagged Peak has made strides in operating efficiency / well economics lowering costs while boosting volumes post processing of 3D seismic data and further asset delineation. We favor the company’s “baseload” plan of stable growth and development while maintaining a strong balance sheet. We forecast the company’s efficiency improvements to result in a 15% YoY decrease in well costs on a per lateral foot basis. Jagged Peak has ample core inventory for large-scale development even after high-grading its Big Tex position.
SunTrust has set a $12 price target on the stock. The consensus target is $11.43, and the stock ended the week at $6.76 a share.
Northern Oil and Gas
Stifel analysts remain very positive on this small-cap energy play. Northern Oil and Gas Inc. (NYSE: NOG) is engaged in the acquisition, exploration, development and production of oil and natural gas properties, primarily in the Bakken and Three Forks formations within the Williston Basin in North Dakota and Montana. It is the largest non-operator in that basin.
With Bakken returns continuing to improve to well above 50%, and Northern’s operating partners representing what may be as the best operators in the basin, there is upside potential.
The company posted solid second-quarter results and also announced its chief executive officer will step down, a move that some on Wall Street welcome after some issues in the past. It was noted this week the company is expected to have free cash flow equal to almost three-quarters of the stock market capitalization over the next year.
Stifel has a monster $5.80 price target. The consensus target is $3.72, and the shares were changing hands at $1.89 on last look.
These are five energy stocks for aggressive accounts that look to get share count leverage on companies that have sizable upside potential and to add energy exposure. While not suited for all investors, these are not penny stocks with absolutely no track record or liquidity, and major Wall Street firms have research coverage.
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