After witnessing a slight fall in demand in August, given the surge in COVID-19 cases in various countries and poor economic growth of China, the world’s largest crude importer, the gradual increase in demand from several countries has brought stability to oil prices since late August. But because Hurricane Ida caused massive damage to oil-producing facilities in the U.S. Gulf of Mexico, the rising demand and supply imbalance is causing oil prices to rise.
Given the resurgence of COVID-19 cases and rising inflation, many analysts expect the stock market to remain under pressure in the near term. Consequently, large-cap energy stocks, which are currently trading at expensive valuations, might witness a price decline.
Also, because the market has entered a historically tricky trading period, we think it could be wise to bet on low-priced energy stocks Archrock, Inc. (AROC), VAALCO Energy, Inc. (EGY), Amplify Energy Corp. (AMPY), and Geospace Technologies Corporation (GEOS) that are well-positioned to capitalize on the rising oil prices. Currently, trading at or below $10, we think these stocks have the potential to deliver significant returns in the coming months.
Archrock, Inc. (AROC)
Houston, Tex.-based AROC is an energy infrastructure company that offers natural gas compression and aftermarket services, as well as provides used equipment for the oil and gas industry. It also provides various aftermarket services, including the sale of parts and components and the provision of operation, maintenance, overhaul, and reconfiguration services to its customers.
On June 7, AROC collaborated with Infosys Limited (INFY), an Indian multinational information technology company that provides business consulting, information technology, and outsourcing services, to integrate digital technologies and mobile tools for its field service technicians. INFY will leverage its pre-configured accelerator for Microsoft Corporation’s (MSFT) Microsoft Dynamics 365 Field Service Application to streamline and enhance AROC’s field services and operations. AROC’s total revenue increased marginally from the prior-quarter to $195.62 million for its fiscal second quarter, ended June 30, 2021. The company’s net income was $8.75 million, up 109.9% from the prior quarter. Its EPS increased 100% sequentially to $0.06. AROC had $3.31 million in cash and cash equivalents as of June 30, 2021.
Analysts expect AROC’s revenue to increase 2.5% year-over-year to $210.72 million in the current quarter, ending September 30, 2021. The stock has gained 20.7% in price over the past year to close yesterday’s trading session at $7.30.
AROC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
AROC has a B grade for Quality. In the 41-stock Energy – Services industry, it is ranked #1.
To see additional POWR Ratings for Stability, Sentiment, Growth, Value, and Momentum for AROC, click here.
VAALCO Energy, Inc. (EGY)
EGY is an independent energy company that acquires, explores for, develops, and produces crude oil and natural gas. The Houston, Tex., company owns producing properties and conducts exploration activities in the Philippines and Gabon and has an interest in the Texas Gulf Coast area. It has additional international exploration interests in South and North America and Africa.
On August 25, EGY’s affiliate VAALCO Gabon, SA signed a binding letter of intent with World Carrier Offshore Services Corporation to provide and operate a Floating Storage and Offloading (FSO) unit at EGY’s Etame Marin field offshore Gabon for up to eight years. Replacing the existing Floating Production, Storage and Offloading unit (FPSO), this new unit will significantly reduce storage and offloading costs by 50% and increase effective capacity for storage by more than 50%, resulting in a corresponding increase in recovery and reserves at Etame, and robust financial performance through 2030.
On May 11, EGY entered crude oil commodity swap agreements for a total of 672,533 barrels at a Dated Brent weighted average price of $66.51 per barrel from May 2021 through October 2021. By benefiting from rising oil prices, the company hopes to maintain a strong cash flow for the second half of this year.
During its fiscal second quarter, ended June 30, 2021, EGY’s revenue increased 161.6% year-over-year to $47.02 million. The company’s income from continuing operations came in at $5.92 million, up 911.5% from the prior-year period. While its adjusted net income increased 58.8% year-over-year to $8.40 million, its adjusted EPS increased 55.6% to $0.14. The company had $22.88 million in cash and cash equivalents as of June 30, 2021.
Analysts expect EGY’s revenue to grow 159.5% year-over-year to $174.30 million in the current year. EGY’s EPS is expected to grow at a 2% rate per annum over the next five years. Over the past nine months, the stock has gained 60.9% in price to end yesterday’s trading session at $2.46.
EGY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy. In addition, EGY has an A grade for Momentum, and a B grade for Value, Sentiment, and Quality.
Moreover, it is ranked #4 of 92 stocks in the Energy – Oil & Gas industry.
In addition to the POWR Rating grades we’ve highlighted, one can see EGY’s ratings for Growth and Stability here.
Amplify Energy Corp. (AMPY)
AMPY acquires, develops, exploits, and produces oil and natural gas properties. Its properties consist of operated and non-operated working interests in producing and undeveloped leasehold acreage, as well as working interests in identified producing wells. AMPY is based in Houston, Tex.
AMPY’s total revenues for its fiscal second quarter, ended June 30, 2021, was $80.39 million, representing a 128.6% rise from the prior-year period. The company’s adjusted EBITDA came in at $23.85 million for the quarter, indicating an 11.9% rise from the prior-year period. As of June 30, 2021, the company had $15.15 million in cash.
Analysts estimate AMPY’s revenue to be $66.07 million for the current quarter, ending September 30, 2021, representing a 25.3% improvement year-over-year. The stock’s EPS is expected to grow at a 15% rate per annum over the next five years. AMPY has gained 173.1% in price over the past nine months. It ended yesterday’s trading session at $3.66.
It’s no surprise that AMPY has an overall B rating, which translates to Buy in our POWR Ratings system. In addition, the stock has an A grade for Momentum, and a B grade for Growth, Value, and Quality.
The stock is ranked #3 of 92 stocks in the Energy – Oil & Gas industry.
Click here to see additional POWR Ratings in Sentiment and Stability for AMPY.
Geospace Technologies Corporation (GEOS)
GEOS designs and manufactures instruments and equipment used in the oil and gas industry to acquire seismic data to locate, characterize, and monitor hydrocarbon-producing reservoirs. The Houston, Tex.-based company also designs and manufactures thermal imaging equipment and distributes dry thermal film products to the commercial graphics industry.
On July 7, GEOS acquired Aquana, LLC, a comprehensive wireless water monitoring and control system provider. By leveraging Aquana’s premier IoT water management platform and GEOS’ technologies and market expertise, the company is looking forward to serving the growing property management and water utility markets by helping clients maximize revenue, limit costs, and mitigate water damage.
For its fiscal third quarter, ended June 30, 2021, GEOS’ total revenues increased 1.7% year-over-year to $23.08 million. As of June 30, 2021, the company had $20.07 million in cash and cash equivalents.
GEOS’ EPS is expected to grow at a 37% rate per annum over the next five years. GEOS has gained 19.9% over the past nine months and 16.6% over the past three months. It ended yesterday’s trading session at $10.
GEOS’ POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has a B grade for Value and Quality. Click here to see the additional ratings for GEOS (Growth, Sentiment, Momentum, and Stability).
Among 49 stocks in the Energy – Services industry, GEOS is ranked #1.
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AROC shares were unchanged in premarket trading Friday. Year-to-date, AROC has declined -11.54%, versus a 21.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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