Brent oil price has touched $90, which has caused escalating geopolitical tensions in the Middle East. Of course, it’s not the only factor for oil trending higher. OPEC and allies have persisted with production cuts. Additionally, there is a case for rate cuts in the second half of 2024, which is positive for oil and industrial commodities.

Amidst these positive catalysts, there are some attractive oil & gas penny stocks to buy for stellar returns quickly. This column discusses three penny stock ideas that can deliver 100% returns before the end of the year.

It’s worth noting that the broad oil & gas sector does not only include exploration companies. There are interesting plays in the oil tanker and offshore drilling segment. Borr Drilling (NYSE:BORR) and Transocean (NYSE:RIG) trade above $5 and are not penny stocks. However, these are among the names to consider for robust returns in the coming quarters.

Let’s discuss three penny oil & gas stocks poised for a strong rally.

Nordic American Tankers (NAT)

Nordic American Tankers (NYSE:NAT) is among the most undervalued oil & gas penny stocks to buy. NAT stock trades at a forward price-earnings ratio of 6.8 and offers a robust dividend yield of 12.37%.

As an overview, Nordic American is a crude oil tanker company with a current fleet of 19 Suezmax tankers. The company has benefited from healthy time charter rates, but I expect TCS rates to remain robust with high geopolitical tensions.

As of Q4 2023, Nordic reported an average TCE rate of $39,170 per day per ship. The operating cost per day per ship for the same period was $9,000. Therefore, there is clear visibility for healthy EBITDA and robust cash flows at current rates.

It’s also worth noting that the company has low leverage and a net debt of $11.6 million per ship. If the market remains strong, Nordic has the flexibility to expand its fleet. Further, healthy cash flows show a strong case for deleveraging and improving credit metrics.

Ring Energy (REI)

Ring Energy (NYSE:REI) stock has witnessed a strong rally of 30% in the last month. The stock, however, continues to trade at a valuation gap, and I expect the rally to be sustained. Ring Energy is involved in exploring, producing and developing oil & gas assets.

The company commands a market valuation of $411 million. The company’s proven reserves have a present value PV10 of $1.65 billion. This clearly indicates the valuation gap and the upside potential as oil trends rise.

In addition, the company’s financial metrics have been improving. For Q4 2023, Ring Energy reported an adjusted free cash flow of $16.3 million. With production growth and higher realized oil prices, adjusted FCF can potentially be $80 to $100 million for 2024.

This will provide flexibility to invest in proven undeveloped reserves. At the same time, Ring Energy has a record of growth through acquisitions. The addition of new assets can boost long-term growth visibility.

Tullow Oil (TUWOY)

Tullow Oil (OTCMKTS:TUWOY) is a deeply undervalued oil & gas penny stock to buy for multibagger returns. The company has oil & gas exploration activity in Africa. Further, Tullow is focused on West and East Africa resources, where the potential opportunity is for more than 30 billion barrels of oil.  The company’s net 2P reserves and 2C resources are 900 million barrels of oil equivalent.

From a financial perspective, there are two points to note. First, Tullow reported $250 million in net debt reduction for 2023. Further, the company is on track to deliver $800 million in free cash flows from 2023 to 2025. The company aims to reduce net debt by $700 million by 2025. Credit metrics will, therefore, continue to improve.

This is important as Tullow has 200mmboe in 2P reserves and 700mmboe in 2C resources. Significant exploration expense is likely to boost production in the next few years. The company has ample financial flexibility.

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Read More: Penny Stocks — How to Profit Without Getting Scammed

On the date of publication, Faisal Humayun did not hold (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.