Since the beginning of 2022, the energy sector has been outperforming the overall market amid rising commodity prices in response to a highly uncertain supply outlook. With the ongoing political response to the Russian invasion of Ukraine, commodity prices may continue to soar for the foreseeable future.
Year-to-date (YTD), the energy industry experienced a solid rally and outperformed the broader market, as evidenced by the 31.34% increase in the Energy Select Sector SPDR ETF (XLE) compared to SPDR S&P 500 Trust ETF (SPY) 13.76% loss over the same period. Consequently, investors may consider adding shares of energy stocks to protect their portfolios against the current volatility.
Hence, in today’s article, I intend to analyze and compare two popular energy stocks, Camber Energy, Inc. (CEI) and Tellurian Inc. (TELL), to see which one presents a better buying opportunity at current levels.
Camber Energy is an energy company that engages in the acquisition, development, and sale of crude oil, natural gas, and natural gas liquids (NGL) in the Cline shale and upper Wolfberry shale in Glasscock County, Texas. Tellurian has a portfolio of natural gas production, LNG marketing, and infrastructure assets, including an about 27.6 million tons per year LNG export facility and an associated pipeline.
YTD, shares of CEI have fallen 6.5%, while TELL stock advanced about 61.7% over the same period.
On March 11th, Camber Energy announced that it had redeemed 2,636 shares of its Series G Preferred Stock issued on December 31st, 2021. This move was backed by a $100M financing commitment from an institutional investor. In addition, the company decreased the number of its Series C Preferred Shares by around 59% since December 1st, 2021, via redemptions and conversions.
On April 1st, Credit Suisse analyst Spiro Dounis upgraded Tellurian to “Outperform” from “Neutral”. Spiro Dounis thinks Tellurian is near the approval of the Driftwood LNG project, evaluating the future project phases amid the “strong demand” for U.S. LNG. The analyst noted that LNG prices remain high and may increase even further, thus benefiting Tellurian. As a result, Credit Suisse boosted its price target on TELL shares to $8 from $5.50.
Financials Overview & Analysts Estimates
Camber Energy, Inc. last issued its earnings results on November 23rd. It is important to note that the latest available financial report for Camber Energy is for Q3 2020 and it filed restated financials in November 2021. In the first half of 2020, the company’s total revenue declined 57% year-over-year to $91,147, caused by a significant drop in the market price of oil and gas amid the COVID-19 pandemic.
On the expenses side, its total operating expenses decreased 36% year-over-year to $1.65 million in 1H2020, primarily due to a decrease in General & Administrative, and Lease Operating expenses. However, its net loss stood at $29.6 million in 1H2020, compared to a loss of $6.5 million as of 1H2019, due to the loss on the fair value of derivatives contracts.
As of September 30th, 2020, the company had total cash of $1.11 million on balance. With a cash burn rate of $1.34 million in 1H2020, the company’s liquidity position looks weak. However, the recent financing agreement should help it avoid the dilution of shareholders’ equity for the foreseeable future.
On February 23rd, Tellurian issued an earnings report for the fiscal year of 2021. In FY2021, the company’s total revenue rose 90.4% year-over-year to $71.3 million, beating Wall Street estimates by $2.67 million. The revenue growth was driven by higher Natural gas sales due to increased realized natural gas prices and higher LNG sale revenues. However, Tellurian disclosed a GAAP EPS of ($0.28), missing analysts’ consensus by $0.06.
Furthermore, the company’s net loss figure came in at $114.7 million, indicating an improvement compared to a loss of $210.7 million as of FY20.
Finally, the company ended 2021 with cash on the balance of about $300 million. It also reported over $360 million in standardized measures of discounted future net cash flows of proved natural gas reserves. Hence, its liquidity position looks strong, excluding the risk of dilution.
For the first quarter, analysts expect TELL’s EPS to come in at ($0.06), representing a 20.94% year-over-year increase. Besides, its revenue for the first quarter of 2022 should grow 355.38% YoY to $39.65 million.
Comparing Options Market Sentiment
Looking at the May 6th, 2022, option chain for both CEI and TELL, let’s figure out options market sentiment by analyzing the calls/puts ratio. In CEI’s case, the open calls/open puts ratio at the $0.50 strike price comes in at 1.52x, implying a bullish options market sentiment. The open calls/open puts ratio for TELL at the $5.00 strike price is 12.1x, indicating a relatively stronger bullish options market sentiment.
The Bottom Line
While Camber Energy and Tellurian should benefit from the higher commodity prices, I believe Tellurian is a better pick at current levels based on its relatively better financials, favorable analysts coverage, strong liquidity position, and superior options market sentiment.
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CEI shares fell $0.02 (-3.05%) in premarket trading Monday. Year-to-date, CEI has declined -7.06%, versus a -12.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Oleksandr Pylypenko
Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist. More...
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