Oil’s Penny Powerhouses: 3 Small-Cap Stocks Gushing with Potential


  • These small-cap, inexpensive oil stocks are brimming with potential at the moment.
  • ProFrac Holding (ACDC): This fracking company is firing on all cylinders.
  • Newpark Resources (NR): This picks-and-shovels stock is headed into an accelerated period of demand.
  • Southwestern Energy (SWN): SWN is a takeover target worth chasing.
Small-Cap Oil Stocks to Buy - Oil’s Penny Powerhouses: 3 Small-Cap Stocks Gushing with Potential

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Oil prices remain elevated with U.S. oil production 1.4% higher than the record levels of a year ago. Prices of West Texas Intermediate (WTI) are approximately 7% higher than they were a year ago. The combination of high prices and production suggest continued strength across the energy sector. In turn, investors are looking to small cap oil stocks for their outsized potential to produce returns at the moment.

Elevated prices are expected to continue, which should prompt strong continued production. The current market is essentially supporting a race to pump as much oil as fast as possible. Firms that can do so stand to benefit greatly.

Energy firms of all sizes are well positioned currently. However, small cap firms have the most potential to grow most rapidly. Let’s take a look at a few of those companies.

ProFrac Holding (ACDC)

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ProFrac Holding (NASDAQ:ACDC) is an oil and gas equipment and services firm surging on strong earnings.

The company primarily operates in the hydraulic fracturing segment and also produces what is known as proppant. Proppant refers to sand or ceramic material that is used to hold an induced hydraulic fracture open. 

The company reported earnings on May 9 showing a 19% sequential increase in revenue. That led the company into positive operating income from negative operating income during the previous quarter. Free cash flow, all the money left over after bills are paid, more than doubled, rising to $25.8 million. 

The majority of ProFrac Holdings revenues are attributable to its simulation segment. That segment does exactly what it sounds like, providing analytics and 3D visualizations used to assess fracking projects. The company forecasts steady to improving pricing while also anticipating improved profitability.

Meanwhile, analysts anticipate share prices could rise above $18, well above the current price of around $8.50 per share.

Newpark Resources (NR)

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Newpark Resources (NYSE:NR) provides various products and rentals to the energy industry. Thus, it is a picks-and-shovels energy stock investment. The company primarily serves the exploration and production (E&P) portion of the energy industry. 

Given that production is expected to continue rising due to high prices, Newpark Resources remains well-situated. The company provides drilling fluids necessary for pulling oil out of the ground and matting systems used in temporary work sites.

The company reported first-quarter results on May 2 showing net income had increased by 30%. Interestingly, revenue declined during the quarter. The company was capable of finding increased efficiency leading to the increases in net income. Investors are particularly interested in that part of the report stating that rental activity strengthened at the end of the first quarter.

The company anticipates a continuing acceleration of activity into the second quarter, which is the primary reason to consider investing in the stock currently.

Southwestern Energy (SWN)

Production operator communicate between central control room by using radio to operate ball valve at offshore oil and gas processing platform for control gases and liquid crude oil process. Energy Stocks. Bargain energy stocks for June
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Southwestern Energy (NYSE:SWN) is an oil and natural gas exploration and production firm. The company is focused on the development of unconventional resources in Pennsylvania, West Virginia, Ohio and Louisiana.

The primary reason to consider investing in Southwestern Energy is that it is an acquisition target for Chesapeake Energy (NASDAQ:CHK). 

The proposed merger of the two firms was delayed in early April after regulators requested further information about the deal. The deal is expected to close by the end of the second quarter. The second quarter will end in late June meaning investors who wish to gamble on the merger have a few weeks in which to do so.

Southwestern Energy is not particularly attractive from a fundamental perspective. The company produced a net loss recently that would make it much less attractive were it not a takeover target. However, it is and investors should consider it for that reason.

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.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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