The rising demand for oil with increasing mobility and a reopening of the industrial sector, coupled with continued supply cuts by the major oil producing countries, is driving a surge in oil prices. Goldman Sachs expects crude oil to rise to $80 per barrel by the end of the year. This bodes well for oil companies. According to a Research and Markets report, the global oil and gas pipeline market is expected to grow at a CAGR of more than 6% between 2021-2026.
Investors’ interest in the oil energy stocks is evident in SPDR S&P Oil & Gas Exploration & Production ETF’s (XOP) 17.9% gains over the past month compared to the SPDR S&P 500 Trust ETF’s (SPY) 0.2% returns.
Given this backdrop, we think it could be wise to scoop up the stocks of lesser-known oil energy companies Ovintiv Inc. (OVV) and Crescent Point Energy Corp. (CPG) because they are expected to continue benefiting from rising oil prices.
Ovintiv Inc. (OVV)
Formerly known as Encana Corporation, OVV was incorporated in 2020 and engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids. It operates through its USA Operations, Canadian Operations, and Market Optimization segments. The company’s principal assets include Permian in West Texas and Anadarko in West-Central Oklahoma.
OVV closed its Eagle Ford asset sale on May 19, 2021. The proceeds from this sale, combined with its Duvernay asset sale, will be used for debt reduction. Ovintiv CEO Doug Suttles said “Our priorities today are clear–reduce debt, maintain scale, drive efficiencies, and return cash to shareholders.”
OVV’s non-GAAP operating earnings increased 985.2% year-over-year to $293 million in the first quarter, ended March 31, 2021. Its adjusted net earnings before income tax grew 1425.9% year-over-year to $412 million. And its non-GAAP cash flow came in at $890 million, which represents a 66.3% year-over-year increase.
Analysts expect OVV’s EPS to increase 3,400% year-over-year to $0.99 for the quarter ending September 30, 2021. It surpassed consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 37.8% year-over-year to $1.71 billion for the current quarter, ending June 30, 2021. The stock has gained 229.7% over the past year to close yesterday’s trading session at $29.61.
OVV’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 assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Momentum, and a B grade for Growth. We have also graded OVV for Value, Quality, Sentiment and Stability. Click here to access all OVV’s ratings. OVV is ranked #14 of 51 stocks in B-rated Foreign Oil & Gas industry.
Crescent Point Energy Corp. (CPG)
CPG explores, develops, and produces light and medium crude oil and natural gas reserves in Western Canada and the United States. Its crude oil and natural gas properties and related assets are in the provinces of Saskatchewan, Alberta, British Columbia, and Manitoba.
On April 1, 2021, CPG acquired Shell Canada Energy’s Kaybob Duvernay assets in Alberta for $900 million. The strategic acquisition comports with CPG’s core principles of balance sheet strength and sustainability. The transaction is expected to enhance the company’s free cash flow profile and inventory depth and will include key infrastructure that is expected to lower future capital requirements.
CPG’s net debt decreased 13.5% year-over-year to $2.01 billion in the first quarter, ended March 31, 2021. Its adjusted net earnings from operations grew 95.3% year-over-year to $95.1 million. Its net income came in at $21.4 million versus a $2.32 billion net loss in the prior-year period.
For 2022, analysts expect CPG’s EPS to increase 70.74% year-over-year to $0.68. For the current quarter, ending June 30, 2021, its revenue is expected to increase 212.1% year-over-year to $601.09 million. The stock has soared 190.2% over the past year to close yesterday’s trading session at $4.76.
CPG’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The stock has an A grade for Momentum, and a B grade for Growth and Quality.
Within the Foreign Oil & Gas industry, CPG is ranked #16. To see all the POWR Ratings for CPG (Stability, Value and Sentiment), click here.
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OVV shares were trading at $30.72 per share on Thursday afternoon, up $1.11 (+3.75%). Year-to-date, OVV has gained 113.93%, versus a 12.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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