Oil and gas prices are soaring on the back of robust demand with the reopening of the economy. According to the latest Energy Information Administration (EIA) report, global oil demand has almost reclaimed pre-pandemic levels. West Texas Intermediate (WTI) is trading near its highest level since 2014. Oil prices were trading at a two-week high on November 9, with Brent crude rising 1.6% to settle at $84.78 per barrel and WTI crude climbing 2.7% to $84.15. The the bipartisan infrastructure spending bill passed by Congress this week is expected to boost economic growth and the oil demand further.

OPEC and its allies are reluctant to ramp up the oil supply. After much insistence from the U.S. government, the cartel agreed to a  400,000 barrel-a-day production hike for December, which is insufficient to meet the demand. Therefore, oil prices could keep ascending.

Given the rising prices, we think the shares of Tellurian Inc. (TELL) and Kosmos Energy Ltd. (KOS), which are currently trading at less than $10, could be solid additions to one’s portfolio.           

Tellurian Inc. (TELL)

TELL is a natural gas company in Houston, Tex., which is focused mainly on developing liquefied natural gas (LNG) production on the United States Gulf Coast and engages in building up infrastructure assets.

On November 5, TELL priced  a public offering of $50 million in  senior notes due 2028. The company plans to use the proceeds for general corporate purposes and for the potential accumulation of upstream assets.

On October 22, TELL announced that it would transfer its listing of common stocks from the Nasdaq Capital Market to NYSE American. The company expects to leverage the exchange’s prestigious platform for the  benefit of its shareholders.

In July, TELL signed a Sales and Purchase Agreement (SPA) with Shell NA LNG LLC, a Royal Dutch Shell plc (RDS.A) subsidiary for the Driftwood LNG project. Regarding the SPA, President and CEO Octávio Simões said, “Shell manages one of the largest and most diverse portfolios of LNG in the world and is leading the industry in delivering CO2e neutral LNG cargoes. Owing to Driftwood’s integrated project, our ability to accurately measure well to loading arm emissions and reduce emissions where operationally possible further enables Shell’s CO2e neutral LNG offering.”

For the third fiscal quarter, ended September 30, TELL’s total revenue increased 9.6% year-over-year to $15.64 million. Its cost of sales declined 66.8% from the prior-year quarter to $3.07 million. And in the nine months ended September 30, the company’s cash and cash equivalents balance was  $210.81 million, up 159% from the same period last year.

A $22.29 million consensus revenue estimate for the current quarter (ending December 2021) indicates a 158.5% increase from the prior-year quarter.

TELL’s stock has gained 316.7% in price over the past year and 251.6% year-to-date to close yesterday’s trading session at $4.50.

Kosmos Energy Ltd. (KOS)

KOS, in Hamilton, Bermuda, operates as a deep-water oil and gas exploration company focused along the Atlantic margins. The company holds primary assets in Ghana, Equatorial Guinea, and the U.S. Gulf of Mexico.

On October 21, KOS announced the pricing of a  public offering of $400 million of its 7.750% senior notes due 2027. The proceeds from the offering are expected to be used to refinance private placement notes KOS issued to finance the acquisition of Anadarko WCTP Company.

On October 13, the company declared that it had acquired an additional 18.0% interest in the Jubilee field and 11.0% interest in the TEN fields in Ghana from Occidental Petroleum Corporation (OXY). Regarding  these acquisitions, Andrew G. Inglis, Chairman and Chief Executive Officer of KOS, said, “This is a compelling transaction for Kosmos that accelerates our strategic delivery and is expected to provide long-term sustainable cash flow from fields where we have a deep understanding of the value and future upside.”

KOS’ total revenues and other income were  $200.54 million in its third fiscal quarter, ended September 30. Its total costs and expenses decreased 12.5% year-over-year to $228.52 million. Its net cash provided by financing activities increased 2.8% from the same period last year to $149.64 million.

The Street’s $709.71 million revenue estimate for the current quarter (ending December 2021) reflects a 158.9% rise from the prior-year quarter. The Street expects KOS’ EPS to be  $0.21 for the current quarter. Furthermore,  KOS has an impressive surprise earnings history; it has topped consensus EPS estimates in three of the trailing four quarters.

KOS’ stock has gained 196.1% in price over the past year to close yesterday’s trading session at $3.76. It has gained 60% year-to-date.

TELL shares rose $0.02 (+0.53%) in after-hours trading Wednesday. Year-to-date, TELL has gained 196.88%, versus a 25.22% 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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