The United States Energy Information Administration (EIA) estimated in its short-term energy outlook report that 98.90 million b/d of petroleum and petroleum and liquid fuels were consumed internationally in October, which is about 4.50 million b/d greater than October 2020. Furthermore, EIA predicts that global consumption of petroleum and liquid fuels will increase by 3.30 million b/d in 2022.
For the first nine months of this year, the 24 most significant oil and gas companies posted a combined profit of $174 billion. They also registered a $74 billion profit in the third quarter alone, due to skyrocketing gasoline prices. Following a short dip, oil prices rebounded by $2 on December 7, with Brent Crude futures climbing 2.7% to $75.05 per barrel, and West Texas Intermediate up 3.2% to $71.74 per barrel, on easing omicron concerns and the stalling of Iran’s nuclear talks.
Given this backdrop, we think it might be reasonable to bet on cheap oil and gas stocks Crescent Point Energy Corp. (CPG) and TransGlobe Energy Corporation (TGA), which Wall Street analysts predict will rally by more than 25% in the near term.
Crescent Point Energy Corp. (CPG)
CPG, which is headquartered in Calgary, Canada, explores for, develops, and produces light and medium crude oil natural gas reserves in Saskatchewan, Alberta, British Columbia, and Manitoba in Canada, and North Dakota and Montana in the United States.
On December 6, CPG reported its formal 2022 capital expenditures budget and production guidance and announced a quarterly dividend increase in its next fiscal year’s first quarter. The company also plans to execute share repurchases and renew its credit facilities. CPG expects to generate strong returns and return significant cash flow to shareholders.
CPG’s revenues and other income increased 69.4% year-over-year to CAD636.40 million ($497.24 million) in its third fiscal quarter, ended September 30. Its adjusted net earnings from operations and its per-share value came in at CAD142.60 million ($111.42 million) and CAD0.24, respectively, up 100.8% and 84.6% from the same period last year.
The Street’s $0.17 EPS estimate for the current quarter (ending December 2021) reflects a 64.4% year-over-year increase. And the Street’s $702.05 million revenue estimate for the current quarter indicates a rise of 96.1% from the prior-year quarter.
The stock has gained 130.6% in price over the past year and 106% year-to-date to close yesterday’s trading session at $4.82.
Of the seven Wall Street analysts rating CPG, five have rated it Buy, while two have rated it Hold. The 12-month median price target of $6.21 indicates a 28.8% potential upside. The price targets range from a low of $2.73 to a high of $9.00.
CPG’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 distinct factors, with each factor weighted to an optimal degree.
CPG has an A Momentum grade, and a Growth, Value, and Quality grade of B. In the 49-stock Foreign Oil & Gas industry, it is ranked #16. The industry is rated A. Click here to see the additional POWR Ratings for CPG (Stability and Sentiment).
TransGlobe Energy Corporation (TGA)
TGA and its subsidiaries acquire, explore, produce, and develop crude oil and natural gas in Egypt and Canada. It holds 100% working interests in four production sharing concessions (PSCs) in West Gharib, North-West Gharib, West Bakr, and South Ghalazat in Egypt. It also owns working interest assets in the Cardium and Ellerslie formations in the Harmattan area of Western Canada. The company is headquartered in Calgary, Canada.
On December 2, a Dallas-based corporate advisory firm, Stonegate Capital Partners, updated its coverage of TGA, emphasizing its well-positioned portfolio, well-established production, a solid reserve base, and position in Egypt.
For its fiscal third quarter, ended September 30, TGA’s revenue increased 243.3%% year-over-year to $57.87 million. This can be attributed to a 245.7% rise from the prior-year quarter in petroleum and natural gas sales, net of royalties to $57.87 million. Its net earnings came in at $37.08 million, while its net earnings per share stood at $0.51, both up substantially from their negative year-ago values.
A $0.70 consensus EPS estimate for its next year (fiscal 2022) indicates a 363.2% year-over-year increase. And the $146.62 million consensus revenue estimate for the next year reflects a 0.6% improvement from the current year.
TGA’s stock has gained 264.4% in price over the past year to close yesterday’s trading session at $2.66. It has gained 177.1% year-to-date.
The sole Wall Street analyst rating TGA has rated it Buy. The 12-month median price target of $4.19 indicates a 57.5% potential upside.
It is no surprise that TGA has an overall A rating which translates to Strong Buy in our POWR Rating system. TGA has an A grade for Value, Momentum, Sentiment, and Quality and a B grade for Growth. It is ranked #2 in the Foreign Oil & Gas industry.
To see the additional POWR Rating for Stability for TGA, click here.
Note that TGA is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
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CPG shares were trading at $5.30 per share on Tuesday afternoon, up $0.48 (+9.96%). Year-to-date, CPG has gained 126.61%, versus a 26.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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