Oil prices fell to a six-week low last week on concerns over demand with new COVID lockdowns being considered or implemented in some countries. After Austria announced a nationwide lockdown on November 19, crude oil fell into negative territory. The U.S benchmark for oil, West Texas Intermediate (WTI), even fell more than 4% last week, to a price not seen since October 7.
However, according to OPEC, oil demand should exceed pre-pandemic levels in 2022. Therefore, stocks bought during the dip in the oil prices could deliver rewards to investors when oil prices rebound.
So, we think it could be worth betting on extraction stocks W&T Offshore, Inc. (WTI) and VAALCO Energy, Inc. (EGY). These stocks are currently trading at less than $10 but possess solid rebound prospects.
W&T Offshore, Inc. (WTI)
WTI, in Houston Tex., is an independent oil and natural gas producer that explores and develops oil and natural gas properties in the Gulf of Mexico. The company has interests in 43 offshore fields in federal and state waters and 146 offshore structures. WTI sells crude oil, natural gas liquids, and natural gas and has 144.4 million barrels of oil equivalent.
WTI’s total revenues increased 84.7% year-over-year to $133.95 million in the third quarter, ended September 30, 2021. The company’s cash and cash equivalents grew 489.1% from $43.73 million as of December 31, 2020, to $257.58 million as of September 30, 2021. Its revenues under the Oil segment rose 59.4% from the prior-year quarter to $74.27 million. Also, the company’s revenues under its Natural segments increased 134.9% year-over-year to $45.14 million.
Analysts expect WTI’s revenue for its fiscal year 2021 to be $530.2 million, representing 53% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Its EPS is expected to grow 143.8% in the current year. Furthermore, the stock has gained 105.2% over the past year to close yesterday’s trading session at $3.55. Also, it is currently trading 30.9% below its 52-week high of $5.14, which it hit on July 1, 2021.
WTI’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock has an A grade for Momentum, and a B grade for Growth. We have also graded WTI for Stability, Sentiment, Value, and Quality. Click here to access all WTI’s ratings. The stock is ranked #27 of 84 stocks in the B-rated Energy – Oil & Gas industry.
VAALCO Energy, Inc. (EGY)
Incorporated in 1985, EGY is an independent energy company engaged in acquiring, developing, and producing crude oil. The Houston, Tex.-based company’s properties are located primarily in Gabon and Equatorial Guinea in West Africa. Its subsidiaries include VAALCO Gabon (Etame), Inc., VAALCO Production (Gabon), Inc., VAALCO Gabon S.A., VAALCO Angola (Kwanza), Inc., VAALCO Energy (EG), Inc., VAALCO Energy Mauritius (EG) Limited and VAALCO Energy (USA), Inc.
This month, EGY completed its workovers at the Etame field offshore Gabon and added approximately 1,050 gross barrels of crude oil per day. Through this, the company should maximize its production, and the operations at Etame should generate strong cash flow to fund its strategic initiatives.
During the third quarter, ended September 30, 2021, EGY’s revenues increased 206.2% year-over-year to $55.9 million. The company’s operating income grew 328.2% from its year-ago value to $20.03 million. Its net income rose 316.4% from the prior-year quarter to $31.72 million. Also, the company’s EPS increased 307.7% year-over-year to $0.53.
EGY’s $191.4 million consensus revenue estimate for its fiscal period ending December 2021 represents a 184.9%increase year-over-year. The stock has gained 96% in price over the past year to close yesterday’s trading session at $3.43. In addition, it is trading 20.4% below its 52-week high of $4.31, which it hit on November 5, 2021.
EGY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has an A grade for Momentum, Sentiment, and Quality.
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WTI shares were trading at $3.77 per share on Tuesday morning, up $0.22 (+6.20%). Year-to-date, WTI has gained 73.73%, versus a 26.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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