Independent energy company Southwestern Energy Company’s (SWN) stock gained substantial investors’ attention this year due to the rallying oil and gas prices. The stock has gained 66.1% year-to-date. In addition, its 4.87x forward Price/Book is 152% higher than the 1.93x industry average.
SWN’s total operating revenues came in at $4.14 billion for the second quarter ended June 30, 2022, up 294.1% year-over-year. However, its net income margin of a negative 8.58% is significantly lower than the industry average of 9.90%. Also, its ROCE, ROTC, and ROTA are negative at 194.73%, 7.98%, and 7.72%, compare with the industry averages of 15.53%, 6.68%, and 5.86%, respectively.
Furthermore, analysts expect SWN’s revenue to decrease 40.2% year-over-year to $1.76 billion for the quarter ended December 2022.
However, the demand for oil and gas remains robust. According to Report Linker, the global oil and gas EPC market is projected to grow at a CAGR of more than 4.8% from 2022 to 2027. Investors’ interest in energy stocks is evident from the Energy Select Sector SPDR ETF’s (XLE) 13.6% returns over the past month and 51% year-to-date gains.
We think investors looking to benefit from the industry’s solid prospects could buy under-$10 yet fundamentally sound energy stocks Birchcliff Energy Ltd. (BIREF) and Amplify Energy Corp. (AMPY) instead.
Birchcliff Energy Ltd. (BIREF)
Headquartered in Calgary, Canada, BIREF, an intermediate oil, and natural gas company, acquires, explores for, develops, and produces natural gas, light oil, condensate, and natural gas liquids in Western Canada.
BIREF’s natural gas sales came in at C$286.86 million ($221.65 million) for the second quarter ended June 30, 2022, up 157.1% year-over-year. Its cash flow from operating activities increased 237.9% year-over-year to C$273.71 million ($211.48 million). Moreover, the company’s free funds flow increased 2,064.2% year-over-year to C$201.29 million ($155.53 million).
Over the past year, the stock has gained 135.2% to close the last trading session at $9.29.
BIREF’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BIREF has an A grade for Momentum and a B for Growth and Quality. Within the B-rated Energy – Oil & Gas industry, it is ranked #5 out of 97 stocks. Click here to see the additional POWR Ratings for Value, Stability, and Sentiment for BIREF.
Amplify Energy Corp. (AMPY)
AMPY acquires, develops, exploits, and produces oil and natural gas properties in the United States. It had a total estimated proved reserves of 121.20 million barrels of oil equivalent and 2,417 gross producing wells as of December 31, 2021.
On August 3, 2022, Martyn Willsher, AMPY’s President and CEO, said, “The Company will continue to focus on enhancing operational performance and asset investments to take advantage of the strong commodity price environment and bolster free cash flow.”
AMPY’s total revenues came in at $121.78 million for the second quarter ended June 30, 2022, up 9.3% sequentially. Its net income came in at $29.22 million, compared to a loss of $48.61 million in the previous quarter. Moreover, the company’s EPS came in at $0.73, compared to a loss per share of $1.27 in the prior quarter.
Street expects AMPY’s EPS to increase 15% per annum for the next five years. Over the past year, the stock has gained 112.1% to close the last trading session at $7.91.
AMPY has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Momentum and a B for Value and Quality. It is ranked #24 in the same industry. Beyond what is stated above, we’ve also rated AMPY for Sentiment, Stability, and Growth. Get all AMPY ratings here.
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SWN shares were trading at $7.76 per share on Friday afternoon, up $0.02 (+0.26%). Year-to-date, SWN has gained 66.52%, versus a -13.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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