Global oil markets entered the new year with momentum, having  hit a nine-month high in December. This can be attributed to a reviving global economy, with a resumption of industrial and economic activities. With a global COVID-19 vaccine roll out and easing of social distancing restrictions, global oil demand is expected to recover by 5.5 mb/d to 96.6 mb/d in 2021, following a collapse of 8.8 mb/d in 2020.

On the supply side, OPEC+ has been taking a more flexible approach to managing markets and is meeting monthly to decide on output levels. After a bruising Saudi Arabia-Russia price war in early 2020, OPEC+ came to a settlement and implemented production cuts and several other actions to curb oil price volatility. This has led to higher crude prices that could provide an incentive to increase production by the U.S. shale industry, which saw the biggest decline in output last year.

The near-term impact of a clean energy transition on the oil industry remains unclear because  governments worldwide are currently prioritizing economic revival over all else. With huge fiscal stimulus programs aimed at reviving economies at a faster pace, we think oil companies Genie Energy Ltd. (GNE), VAALCO Energy, Inc. (EGY) and SilverBow Resources, Inc. (SBOW) could deliver substantial gains in the near term.

Genie Energy Ltd. (GNE)

With a market capitalization of approximately $204 million, GNE is a retail energy provider, and an oil and gas exploration company. The company operates through four segments: Genie Retail Energy; GRE International; Genie Energy Services; and Genie Oil and Gas, Inc. It resells electricity and natural gas to residential and small business customers. The company also provides  energy advisory and brokerage services, solar panel manufacturing, and solar installation design and project management activities.

On December 16, GNE announced a joint venture with Community Power Partners to provide customer aggregation and management services to New York’s independent solar power producers. The partnership is expected to deliver  a comprehensive package of benefits to community solar producers.

GNE’s total revenues have increased 12.4% year-over-year to $96.3 billion in the third quarter ended September 30, 2020, driven primarily by increases in average electricity consumption in the U.S. and internationally. Its adjusted EBITDA has risen 18.6% from its year-ago value to $9.5 million, while its net income improved slightly to $6.4 million over the same period, yielding an EPS of $0.24. The company’s international meter acquisitions have led the expansion of its global customer base to its  highest level. GNE’s global customer base increased 15% year-over-year driven by its investment in customer acquisition, and  complemented by more modest domestic residential customer equivalent (RCE) growth.

Analysts expect GNE’s revenues to grow 8.8% year-to-year to $343.10 million in the fiscal 2020 ended December 31. The stock has gained 6.5% over the past year.

GNE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system.

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

GNE has a grade of B for Value and Quality. It is currently ranked #1 of 100 stocks in the Energy – Oil & Gas Industry.

Click here to see the additional POWR Ratings for GNE (Growth, Industry, Momentum, Stability, and Sentiment).

VAALCO Energy, Inc. (EGY)

EGY is an independent energy company engaged in the acquisition, exploration, development and production of crude oil and natural gas. The company’s segments include Gabon, Equatorial Guinea, the United States,  Corporate, and others, which includes corporate and operations support.

In November, EGY  signed an agreement to acquire Sasol Gabon’s 27.8% working interest in the Etame Marin block offshore Gabon to add to its  currently owned 31.1% working interest. This value accretive strategic acquisition is expected to nearly double EGY’s total net production and reserves, thereby positioning the company as one of the leading independent exploration and production companies in West Africa.

Last month , EGY entered  crude oil commodity monthly swap agreements totaling  709,262 barrels at a price of $53.10/barrel until January 2022. Given the recent rise in crude oil prices that has improved its free cash flow margins, the Company is hedging its production volumes to further enhance its liquidity.

EGY performed well operationally in the third quarter (ended September 30, 2020) with net sales of 412,000 barrels of oil, up 47.7% year-over-year. Its net sales have increased 3.7% year-over-year to $18.26 million in the third quarter. And its  operating income has risen 211.7% from the year-ago value to $4.68 million, while its net profit improved 294.4% to $7.62 million over the same period, yielding an EPS of $0.13.

Analysts expect EGY’s EPS to rise at a CAGR of 2% over the next five years. A consensus revenue estimate of $103.30 million in the fiscal 2020 (ended December 31) represents  a 22.2% improvement from the year-ago value. EGY has gained 158.3% over the past six months.

It is no surprise that EGY has an overall rating of B, which translates to Buy in our POWR Ratings system. EGY has a grade of B for Quality and Sentiment and an A for Growth. In the same industry, it is ranked #3.

Click here to see the additional POWR Ratings for EGY (Value, Stability, Momentum and Industry).

SilverBow Resources, Inc. (SBOW)

SBOW is a Houston-based energy company engaged in the exploration, development, and production of oil and gas in the Eagle Ford Shale in South Texas. Its operations are focused in three fields located in South Texas: Artesia Wells, AWP and Fasken.

SBOW’s oil and gas sales have increased 83.9% sequentially to $45.70 million in the third quarter ended September 30, 2020. Its adjusted EBITDA has risen 38.5% from the prior quarter to $35.99 million, while its total production volume improved 30.5% to $16,809 MMcfe over the same period.

Analysts expect SBOW’s revenues to grow 33.2% year-to-year to $236.20 million in its  fiscal 2021 ending December 31. A consensus EPS estimate of $4.27 in the current year represents  a 141.2% improvement from the year-ago value. The company has an impressive earnings surprise history; it beat consensus Street’s estimates in three of the trailing four quarters. The stock has gained 94.7% over the past six months.

SBOW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B which equates to Buy in our proprietary rating system. SBOW has a grade of B for both Growth and Value. In the Energy – Oil & Gas industry, it is ranked #2.

Beyond what we stated above, we also have given SBOW grades for Stability, Momentum, Quality, Industry and Sentiment. Get all SBOW’s ratings here.

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

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GNE shares were unchanged in after-hours trading Wednesday. Year-to-date, GNE has gained 14.70%, versus a 4.33% rise in the benchmark S&P 500 index during the same period.

About the Author: Rishab Dugar

Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...

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