3 Energy Companies Struggling to Meet Demand With Oil Prices

After an outstanding 2022, the energy sector is positioned to perform significantly well in 2023, driven by the sustained demand for oil and gas and constrained supplies due to further oil cuts by OPEC+. The supply-and-demand dynamics would boost energy prices this year despite the uncertain macroeconomic environment.

Given their financial weakness and bleak growth prospects, it could be wise to avoid struggling energy stocks NextDecade Corporation (NEXT), Tellurian Inc. (TELL), and Camber Energy, Inc. (CEI) which are not well-placed to capitalize on strong demand and surging energy prices.

Before delving deeper into the fundamentals of these stocks, let’s take a look at what’s happening in the energy sector.

Last year, companies in the energy sector largely benefitted from surging oil and gas prices, primarily driven by Russia’s invasion of Ukraine. This year, despite various macroeconomic uncertainties, the energy sector is expected to maintain its growth momentum, thanks to strong demand for oil and gas and constrained supplies.

According to the latest International Energy Agency (IEA) Oil Market Report, world oil demand is projected to climb by 2mb/d in 2023 to a record 101.9 mb/d, buoyed by the reopening of the Chinese economy, which will account for 90% of growth. Also, extra cuts by OPEC+ will likely push the global oil supply down 400 kb/d by the end of 2023.

This month, Saudi Arabia and other OPEC+ oil producers announced further oil output cuts of approximately 1.16 million barrels per day (bpd) from May through the rest of the year. The pledges will bring the total volume of cuts by OPEC+ to about 3.66 million bpd, equating to 3.7% of global demand.

Moreover, Bloomberg reported that Russia slashed oil production by about 700,000 bpd last month, a larger cut than the country previously pledged.

According to IEA, the recently announced OPEC+ supply cuts risk exacerbating an unexpected oil supply deficit in the second half of this year and boosting oil prices even during heightened economic uncertainty. Goldman Sachs also raised its Brent oil price forecast for December 2023 by $5 to $95 a barrel and increased the December 2024 forecast by $3 to $100 per barrel.

Given their weak fundamentals and poor outlook, energy stocks NEXT, TELL, and CEI are not well-positioned to capitalize on the sector tailwinds. So, these underperforming stocks are best avoided now.

Let’s discuss the fundamentals of these stocks:

NextDecade Corporation (NEXT)

NEXT is a clean energy company that engages in development activities related to the liquefaction and sale of liquefied natural gas (LNG) and capturing and storing CO2 emissions. It focuses on the development activities of the Rio Grande LNG project in Brownsville, Texas, and other carbon capture and storage projects (CCS projects) with third-party industrial source facilities.

NEXT’s trailing-12-month ROCE, ROTC, and ROTA of negative 227.17%, 15.22%, and 19.23% are significantly lower than the industry averages of 21.44%, 9.60%, and 7.09%, respectively. Likewise, the stock’s trailing-12-month cash from operations of negative $40.08 million compares to the industry average of $570.75 million.

For the fiscal year that ended December 31, 2022, NEXT’s operating loss widened by 179.3% year-over-year to $54.48 million. Net loss attributable to NEXT worsened 172.6% year-over-year to $60.07 million, while net loss per common share widened by 91.2% from the year-ago value to $0.65. In addition, cash outflows from operating and investing activities came in at $40.08 million and 40.89 million, respectively.

Analysts expect NEXT to report a loss per share of $0.65 for the fiscal year (ending December 2023). The company’s loss per share for the fiscal year 2024 is expected to widen 140.5% year-over-year to $1.56. Also, the company has missed the consensus EPS estimates in three of the trailing four quarters, which is disappointing.

Over the past six months, shares of NEXT have declined 4.2% and 4.5% over the past year to close the last trading session at $6.15.

NEXT’s POWR Ratings reflect this weak outlook. It has an overall rating of F, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has an F grade for Value and Quality. It has a D grade for Sentiment and Growth. It is ranked #89 out of 91 stocks in the Energy - Oil & Gas industry. 

Click here to see additional ratings of NEXT (Momentum and Stability).

Tellurian Inc. (TELL)

TELL engages in the natural gas business globally. The company is developing a portfolio of natural gas production, liquefied natural gas (LNG) marketing, and infrastructure assets, including more than 27.6 million tons per annum LNG export facility and an associated pipeline.

TELL’s trailing-12-month gross profit margin of 39.19% is 13.6% lower than the industry average of 45.35%. Also, its trailing-12-month EBIT and net income margins of negative 4.53% and 12.71% compare to the respective industry averages of 21.43% and 13.62%.

TELL’s total operating costs and expenses increased 122.7% year-over-year to $409.70 million for the year that ended December 31, 2022. The company reported a loss from operations of $17.77 million. Its net loss and net loss per common share came in at $49.81 million and $0.09, respectively. Also, cash outflows from investing activities were $565.57 million, up 877.4% year-over-year.

The consensus revenue estimate of $313.77 million for the fiscal year (ending December 2023) indicates a 19.9% decline year-over-year. Also, the company’s loss per share for the current year is expected to worsen by 263% year-over-year to $0.33. Furthermore, analysts expect CEI’s loss per share to widen by 40.8% from the prior year to $0.46 for the fiscal year 2024.

The stock has plunged 49.8% over the past six months and 73.9% over the past year to close the last trading session at $1.36.

TELL’s POWR Ratings are consistent with its weak fundamentals. The stock has an overall rating of F, translating to a Strong Sell in our proprietary rating system.

TELL has an F grade for Stability and Quality and a D for Value and Sentiment. It is ranked #90 of 91 stocks in the Energy - Oil & Gas industry.

To see TELL’s POWR Ratings for Growth and Momentum, click here.

Camber Energy, Inc. (CEI)

Diversified energy company CEI owns minority and non-operated working interests in oil and gas wells in Texas. Additionally, it provides customer energy and power solutions to commercial and industrial clients in North America.

CEI’s trailing-12-month ROTA of negative 310.53% compares to the 7.09% industry average. Similarly, the stock’s trailing-12-month asset turnover ratio of 0.01x is 97.8% lower than the industry average of 0.67x. Also, its trailing-12-month cash per share of $0.06 is 91.7% lower than the $0.77 industry average.

For the year that ended December 31, 2022, CEI reported a loss from operations of $4.38 million. Its net loss before income taxes was $107.74. The company’s net loss attributable to common stockholders came in at $107.74 million or $11.16 per share for the year. Also, as of December 31, 2022, CEI’s cash stood at $1.17 million, compared to $5.85 million as of December 31, 2021.

Shares of CEI have slumped 82.2% over the past six months and 96.9% over the past year to close the last trading session at $1.43.

CEI’s POWR Ratings reflect its poor prospects. It has an overall rating of F, translating to a Strong Sell in our proprietary rating system.

The stock has an F grade for Value and a D for Quality, Stability, and Sentiment. It is ranked last among 91 stocks in the same industry. 

Beyond what has been stated above, we’ve also given CEI grades for Growth and Momentum. Get all CEI ratings here.

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REVISED: 2023 Stock Market Outlook > 

NEXT shares were unchanged in premarket trading Monday. Year-to-date, NEXT has gained 24.49%, versus a 8.20% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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