With fuel demand rising to its highest since the start of the COVID-19 pandemic, crude oil prices witnessed a golden cross last week, which has happened only three times since the beginning of this century. A robust oil price rally has usually followed such uptrends. Analysts forecast oil prices to rally about 50%. Despite concerns surrounding the COVID-19 Delta variant, unprecedented fuel demand is expected to help the energy sector thrive.
Also, U.S. gasoline futures have risen slightly due to the impact of hurricane Ida in the Southern United States and Mexico. Fifteen percent of the total U.S. oil imports are from Gulf of Mexico refineries, which have been closed temporarily ahead of the hurricane, causing oil prices to rise.
Given the surging oil prices, we think leading extraction stocks SilverBow Resources, Inc. (SBOW), VAALCO Energy, Inc. (EGY), Amplify Energy Corp. (AMPY), and Barnwell Industries, Inc. (BRN) are poised to rally in the coming months.
SilverBow Resources, Inc. (SBOW)
SBOW is an oil and gas company based in Houston, Tex., that acquires and develops assets in the Eagle Ford shale located in South Texas.
On August 13, SBOW announced agreements to acquire oil and gas assets in the Eagle Ford shale. The acquisition should bolster SBOW’s position in the industry and improve its financials. As Sean Woolverton, the company’s Chief Executive Officer, commented, “Today’s announcement expands our gas portfolio in the Western Eagle Ford, while also adding oil acreage in three new counties. Each transaction is accretive to Adjusted EBITDA and further reduces our pro forma leverage ratio via the assets’ incremental cash flow.”
SBOW’s net sales increased 181.2% year-over-year to $69.86 million in its fiscal second quarter, ended June 30. Its operating income grew 112.6% from its year-ago value to $33.54 million, while its adjusted EBITDA improved 64.7% year-over-year to $42.79 million.
Analysts expect SBOW’s revenues to increase 70.3% year-over-year to $302 million in the current year. A $7.77 consensus EPS estimate for the current year represents a 46.9% rise from the last year. In addition, SBOW surpassed the Street’s EPS estimates in three of the trailing four quarters. Shares of SBOW have gained 281.8% in price over the past year and 247.3% year-to-date.
The company’s strong fundamentals are reflected in its POWR Ratings. SBOW has an overall rating of A, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has an A grade for Growth, Value, and Momentum, and a B for Sentiment and Quality. Among the 92 stocks in the Energy - Oil & Gas industry, SBOW is ranked #1.
To see the SBOW rating for Stability and additional details, click here.
VAALCO Energy, Inc. (EGY)
EGY is an independent energy company that acquires, explores, develops, and produces crude oil and natural gas. The Houston, Tex., company holds an Etame production sharing contract related to the Etame Marin block located offshore in the Republic of Gabon in West Africa.
On August 25, EGY announced that its affiliate, VAALCO Gabon, SA, had signed a binding letter of intent with World Carrier Offshore Services Corp. to provide and operate a Floating Storage and Offloading unit at EGY’s Etame Marin field offshore Gabon for up to eight years. The agreement is expected to allow the company to sustain its operational excellence and robust financial performance at Etame through 2030.
On May 11, EGY announced that it has entered crude oil commodity swap agreements for a total of 672,533 barrels for the period from and including May 2021- October 2021. This is in line with EGY’s plan to hedge the majority of its 2021 production volumes to protect its cash flows, which are expected to be used to fund the 2021/2022 drilling program of up to four wells and the potential Floating Storage and Offloading unit capital upgrade costs.
EGY’s crude oil and natural gas sales increased 161.6% year-over-year to $47.02 million in its fiscal second quarter, ended June 30. Its operating income stood at $18.87 million, up 2,053.8% from the same period last year. Its net income grew 887.2% from the year-ago value to $5.88 million, and the company’s EPS increased 900% year-over-year to $0.10.
A $231.20 million consensus revenue estimate for the next year indicates a 32.6% increase year-over-year. The Street expects the company’s EPS to rise 58.1% from the current year to $1.36 in the following year.
Over the past year, EGY has gained 128.7% in price to close yesterday’s trading session at $2.47. The stock has gained 39.6% year-to-date.
The company has an overall B rating, translating to Buy in our proprietary POWR Ratings system. In addition, EGY has an A grade for Momentum, and a B grade for Value, Sentiment, and Quality. It is ranked #5 in the Energy - Oil & Gas industry.
Click here to view additional EGY ratings for Growth and Stability.
Amplify Energy Corp. (AMPY)
AMPY acquires, develops, exploits, and produces oil and natural gas properties in the United States. AMPY’s operations focus on Oklahoma, the Rockies, federal waters offshore Southern California, East Texas / North Louisiana, and the Eagle Ford. The company is headquartered in Houston, Tex.
AMPY’s total revenues increased 128.6% year-over-year to $80.39 million in its fiscal second quarter, ended June 30. Its EPS improved 16.4% from its year-ago value. Its cash and cash equivalents balance rose 14.8% from the prior-year quarter to $15.15 million in the fiscal six months ended June 30.
A $66.07 million consensus revenue estimate for the fiscal third quarter, ending September 2021 indicates a 25.3% improvement from the same period last year. In addition, analysts expect the company’s EPS to come in at $0.26 in the current quarter, indicating a 155.3% rise year-over-year.
AMPY has gained 189.3% in price year-to-date. The stock gained 218.5% over the past year to close yesterday’s trading session at $3.79.
It’s no surprise that AMPY has an overall B rating, which equates to Buy in our proprietary rating system. AMPY has an A grade for Momentum, and B for Growth, Value, and Quality. It is ranked #4 in the Energy - Oil & Gas industry.
Beyond what we’ve stated above, we have also rated AMPY for Sentiment and Stability. Click here to view all AMPY ratings.
Barnwell Industries, Inc. (BRN)
BRN acquires, develops, produces, and sells oil and natural gas in Canada. The Honolulu, Hawaii-based company operates through three segments: Oil and Natural Gas; Land Investment; and Contract Drilling.
On July 14, Barnwell of Canada, Limited, BRN’s wholly owned subsidiary, completed a purchase and sale agreement with an independent third party for the sale of Barnwell Canada’s interests in specific natural gas and oil properties located in the Spirit River area of Alberta, Canada. BRN plans to use the funds received from the sale for oil and gas acquisition and drilling opportunities and other corporate opportunities and expects this transaction to reflect as a gain in its fourth quarter, ending September 30, 2021.
BRN’s revenues increased 28.4% year-over-year to $5.11 million in its fiscal third quarter, ended June 30. Its net earnings grew 244% from the year-ago value to $4.98 million. BRN’s EPS increased 240.5% year-over-year to $0.59.
Shares of BRN have gained 175.3% in price over the past year and 84.3% year-to-date to close yesterday’s trading session at $2.34.
BRN has an A grade for Quality, and a B for Momentum in our proprietary POWR Ratings system. It is ranked #20 in the Energy - Oil & Gas industry.
To see additional POWR Ratings for Growth, Value, Stability, and Sentiment for BRN, click here.
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SBOW shares were trading at $18.41 per share on Monday afternoon, down $0.03 (-0.16%). Year-to-date, SBOW has gained 246.70%, versus a 21.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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