As crude oil prices once again trend higher, you may be looking to increase your exposure to energy stocks. However, for the best energy stocks to buy in April, near-term price trends are not the only factor to consider.
For instance, there may be longer, more substantial trends out there to which to capitalize on. This holds especially true, in one particular segment of the overall energy industry.
More importantly, there are many energy stocks out there with catalysts besides the potential for higher fossil fuel prices.
Among both well-known and more under-the-radar energy stocks, there are names with company-specific catalysts aplenty.
These include stocks with event-driven catalysts like the presence of an activist investor, as well as upcoming merger activity. It also includes stocks experiencing favorable jurisdictional developments.
So, what are the best energy stocks to buy in April? Consider these seven. Each one offers not just strong company-specific catalysts, but represents good value as well.
DHT Holdings (DHT)
Bermuda-based DHT Holdings (NYSE:DHT) owns and operates oil tankers around the world.
As I’ve previously discussed, DHT is currently benefiting from favorable industry trends. These have resulted in a big jump in profitability for DHT, enabling the company to maintain its high dividend (7.65% forward yield).
DHT stock has surged 17.23% year-to-date, but more upside may lie ahead. At least, that’s the view of Jeffries’ Omar Nokta.
Late last month, in a research note on tanker stocks, the analyst upgraded DHT from “hold” to “buy,” giving the stock a $14 per share price target.
In his upgrade, Nokta noted that demand trends are likely to stay favorable for the tanker owner in 2024.
This could result in the DHT paying out $2 per share in dividends to investors this year. Not too shabby, considering that you can buy DHT for only $11.50 per share.
Vaalco Energy (EGY)
Vaalco Energy (NYSE:EGY) owns operating interests in several energy exploration and production assets in Canada, Egypt, Equatorial Guinea and Gabon.
In the past month, Vaalco shares have rallied twice, resulting in the stock zooming nearly 60% higher as a result.
Each time, EGY stock rallied for an excellent reason. First, Vaalco rallied in mid-March, because of quarterly results that came in well ahead of sell side forecasts.
The second is because of a very promising update unveiled on March 25. That day, the company announced that it had finalized a 25-year joint operating agreement for its Equatorial Guinea exploration and production asset.
Development of this asset could have a major positive impact on Vaalco’s future profitability. Even after the recent run-up, shares remain cheap, at 5.7 times forward earnings.
Given the stock’s low valuation and strong future prospects, consider EGY one of the best energy stocks to buy in April.
Diamondback Energy (FANG)
When I last wrote about Diamondback Energy (NASDAQ:FANG) in February, the market’s bullish reaction to the oil exploration and production company’s plans to acquire Endeavor Energy Resources was sending FANG to new highs.
Flashing forward to now, FANG stock has continued to trend higher. Before you assume that the potential synergy-driven upside from the Endeavor deal is already priced-in, keep the following in mind.
As revealed in Diamondback’s latest quarterly results, the company has been boosting production at its existing sites.
Improved production at existing assets, plus the benefits from the Endeavor transaction, which will close at the end of this year, could mean big earnings growth in 2025.
The top end of 2025 forecasts call for earnings of $27.17 per share, more than 55% above consensus estimates for 2024 earnings. High earnings will enable Diamondback to bolster its already-aggressive dividend and buyback policy.
Gran Tierra Energy (GTE)
Gran Tierra Energy (NYSEAMERICAN:GTE) is another of the best energy stocks to buy in April that remains very undervalued despite a massive short-term surge in price.
Currently, this stock, which is focused on energy exploration and production in Latin America, is trading for just 2.6 times forward earnings.
Admittedly, the market has previously had a strong reason for heavily discounting GTE stock.
In 2022, the election of an anti-oil president in Colombia resulted in a big increase in jurisdictional risk for Gran Tierra Energy. Since then, however, concerns about this have cooled.
Yes, Colombian President Gustavo Petro has made some anti-oil moves, such as not granting new oil and gas licenses. However, Gran Tierra is increasing production capacity at existing sites.
Investors reacted favorably to the latest production update news. Increased production, plus a continued cool-down in concern about jurisdictional risk, may lead to a additional rerating to the upside for GTE.
Precision Drilling (PDS)
Canada-based Precision Drilling (NYSE:PDS) provides onshore drilling rig services to exploration and production companies around the world. Strong demand has in turn led to strong results for the company in recent quarters.
This has provided enough positive cash flow for Precision to continue with its aggressive debt reduction efforts.
The driller is not only on track to de-lever by a total of $500 million CAD ($369.1 million USD) by 2025. Back in February, PDS stock rallied on news that Precision Drilling would reduce debt by an additional $100 million CAD ($73.8 million) by the end 2026.
To top things off, Precision is plowing the remainder of free cash flow into share repurchase efforts.
PDS is up 34.3% over the past year, but shares are well-positioned to keep gaining in price. That is, if debt reduction and buybacks, which both increase underlying per-share value, continue.
Phillips 66 (PSX)
Shareholder activism has been a key catalyst for Phillips 66 (NYSE:PSX) in recent months.
Last fall, activist fund Elliott Management purchased a large stake in the oil refining giant, then quickly started to push for changes that it believed would lead to value creation for shareholders.
With Elliott making major headway getting management to go with its game plan, it’s not surprising that PSX stock has continued to climb to new highs.
However, even at $163 per share, there may be worthwhile upside, if you decide to enter a position at current price levels.
Elliott believes that its transformation plan could propel PSX to prices topping $200 per share.
This plan includes cost-cutting measures, as well as the divestiture of as much as $20 billion worth of noncore assets. With the shareholder activism catalyst still in motion, PSX is one of the best energy stocks to buy in April.
Southwestern Energy (SWN)
In the near-term, Southwestern Energy (NYSE:SWN) is a merger arbitrage play.
Back in January, the natural gas company agreed to merge with competitor Chesapeake Energy (NASDAQ:CHK), in an all-stock deal.
When the deal closes, shareholders will swap their SWN stock for CHK stock. At today’s prices, this deal price is at $7.70 per share.
While just 1.6% above SWN’s current share price, on an annualized basis this could produce a small but steady return. The deal is expected to close this quarter.
That said, over a longer time frame, parlaying SWN into a position CHK could prove very profitable. This merger is set to produce annual cost savings of $400 million.
There may also be other substantial operating and growth synergies as well. Add in favorable demand trends for natural gas, and there’s much suggesting that this could be a successful energy merger to wager on.
On the date of publication, Thomas Niel 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.comPublishing Guidelines.
