There are a lot of signals which indicate that oil companies should continue to see growing top-line results. That’s primarily a factor of incredibly high oil prices. We consumers feel the effects in many, many ways. Most obviously we see it at the pump, where average gas prices sit at $4.33 per gallon.
Those prices are a product of rising oil prices resulting from Russia’s invasion of Ukraine. The cost of Brent Crude now sits at $110. RBC Capital Markets analyst Michael Tran cautions, “It is not unfathomable for prices to rocket to $200 a barrel by summer, spur a recession and end the year closer to $50 a barrel ($200 call options have been bid). To be clear, this is not our base case, but such a scenario does not sound implausible today.”
Whether that scenario plays out, risk and volatility seem to be omnipresent. That has investors searching for novel ways to capitalize. That brings us to a discussion about penny oil stocks. Always risky, but particularly attractive given the macroeconomic situation.
Let’s jump into some to consider picking up now.
- Baytex Energy Corp. (OTCMKTS:BTEGF)
- Tamarack Valley Energy (OTCMKTS:TNEYF)
- Athabasca Oil Company (OTCMKTS:ATHOF)
- Tellurian (NYSEAMERICAN:TELL)
- Abraxas Petroleum Corp. (OTCMKTS:AXAS)
- CGX Energy (OTCMKTS:CGXEF)
- Gran Tierra Energy (NYSEAMERICAN:GTE)
Penny Oil Stocks: Baytex Energy Corp. (BTEGF)
Baytex Energy Corp. may not have an overwhelming vote of confidence from the group of analysts that cover its stock. In fact, they mostly consider it to be a hold and among the 11 analysts with coverage, only one gives it a buy rating.
But the truth is that Baytex Energy Corp. ended 2021 in a much stronger position than it did in 2020. Within that 12- month period, the firm staged quite a turnaround. It posted a $2.438 million net loss to end 2020. That resulted in negative earnings per share (EPS) figures of $4.35 per share. This all came on the back of annual revenues of just over $975,000.
A year later, Baytex Energy nearly doubled revenue, hitting $1.868 million in sales. That translated to a net gain of $1.613 million in the year and an EPS of $2.82. Remember, these figures were all recorded prior to the current war being staged in Eastern Europe.
Russia’s invasion of Ukraine has caused a massive humanitarian crisis and spiked oil prices in the process. That means BTEGF stock should post even stronger numbers moving forward.
Tamarack Valley Energy (TNEYF)
Tamarack Valley Energy is a penny oil stock to consider for a few reasons. One of the primary reasons is that the company’s operational portfolio includes a high percentage of light oil production. Those operations focus on the Western Canadian Sedimentary Basin in Alberta and Saskatchewan.
The reason that light oil makes Tamarack Valley Energy particularly attractive is that light crude oil commands a higher price than heavy crude oil in commodities markets. The reason is that light crude oil produces a greater percentage of gasoline and diesel when refined. Given the current prices consumers are seeing at the pump, the appeal is obvious.
Like Baytex Energy, Tamarack Valley Energy showed strong improvement in 2021. The company more than tripled its top-line results in 2021. And like Baytex Energy that led Tamarack Valley Energy to post a net gain in 2021 after posting a net loss in 2020.
The difference here is that Tamarack Valley Energy has the overwhelming confidence of the analysts that cover its stock. 11 of those 12 analysts have given it a buy rating which should give potential investors increased confidence.
Penny Oil Stocks: Athabasca Oil Company (ATHOF)
Athabasca Oil Company is another producer based in western Canada. The company’s strategy is dual-pronged. It focuses on light oil production and thermal oil. Light oil, as we just saw, commands a higher price than other forms because of the percentage of gasoline and diesel it produces when refined. That is why the company claims that it “offer investors excellent exposure to oil prices and are focused on maximizing profitability.” It depends on light oil to pad its top-line when gas and diesel prices are high.
The company utilizes its thermal oil assets as a base for financial stability. Those assets are characterized by a low production decline. It utilizes thermal oil revenue to shore up operations. When gasoline and diesel prices rise, like now, it receives a boon to its top line.
That’s exactly why investors should consider giving ATHOF stock a chance. Athabasca Oil Company is a small company and recorded a mere $194k in cash flow from operations in 2021. That said, it still recorded a net gain in the year.
It’s fair to characterize the company as one with a solid base and upside potential through its light oil production.
According to Tellurian CEO Octavio Simoes, “The global economy is in the early stages of an energy super cycle driven by strong demand for natural gas and several years of underinvestment in energy infrastructure. Tellurian is optimally positioned with fully executed market-based LNG SPAs and a permitted project.”
That makes Tellurian potentially attractive right now as prices have risen since 2020. If Simoes is correct, TELL stock has the potential to rise quickly. That’s likely why investors would consider it. The other reason is that liquefied natural gas (LNG) demand is predicted to increase 90% by 2040 according to research by Shell (NYSE:SHEL).
Tellurian is less about the Russia-Ukraine war than LNG demand in Asia in the future. Nevertheless, Tellurian is a stock to consider for that reason. The company lost $114.7 million throughout 2021. It isn’t a particularly strong operator but that might not matter in the future.
Penny Oil Stocks: Abraxas Petroleum Corp. (AXAS)
If U.S. oil production ramps up to fill the void created by Russia’s invasion of Ukraine, then AXAS stock will appreciate rapidly. Abraxas is an E&P firm that has recently refocused solely on the Delaware Basin of west Texas. It sold its assets in the Williston Basin in the Dakota states at the beginning of the year.
That sale netted the company $87.2 million and freed it to become a pure-play Delaware Basin E&P firm. That transaction allowed the company to pay down existing debt but didn’t translate to much movement in its stock price.
AXAS stock did however move significantly on Feb. 28 when it provided an operational and reserves update. Those reserves grew 467% to $229 million in value. This essentially makes Abraxas Petroleum an interesting firm at a very interesting time.
The company has proven reserves in Texas’ Delaware Basin at a time when many are calling for domestic production to ramp up.
CGX Energy (CGXEF)
CGX Energy is particularly interesting right now. It is making a push to develop strategic assets in Guyana in cooperation with Frontera Energy Corp. (OTCMKTS:FECCF). Frontera has loaned CGX Energy $35 million which will be utilized as the two companies jointly develop offshore prospecting efforts in Guyana.
CGX Energy will draw that $35 million loan down by July 31 at the latest. It should then be evident that the company is really betting that those offshore Guyana reserves hold a lot of potential value.
CGX Energy has very little analyst coverage. However, the single analyst who has initiated coverage does rate it buy-worthy. In any case, CGXEF stock is rising on the news. The market seems to be eager to learn about potential plays that could offset the supply imbalances we’re currently experiencing.
Penny Oil Stocks: Gran Tierra Energy (GTE)
Gran Tierra Energy looked reasonably attractive prior to the current crisis. That was evident when a few days prior to Russia’s invasion of Ukraine Gran Tierra Energy released its 2021 earnings results.
There was plenty to be optimistic about in that release. The company’s daily oil production increased by 17% throughout the year, reaching 26,507 barrels of oil per day. That number had risen to 30,000 barrels of oil per day when the company released those results in late February.
On top of that, the company also posted its highest cash flow — $37 million — since 2012. And the company generated $42 million in net income, its highest such figure since 2018. The company’s operations focus on E&P in Colombia and Ecuador.
South American oil should become strategically more valuable and that alone makes GTE stock worth considering. Never mind that it was already operating well prior to the war kicking off in Ukraine.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.