The long-awaited rebound in the oil and gas industry is finally here. The surge in oil prices has buoyed oil stocks from their pandemic lows and has investors salivating at the prospects. Of course, your risk appetite will dictate how you’ll want to cash in on the renewed optimism in the sector. However, if you’re more of a speculative investor looking at high-risk, high-reward names, look no further than the Reddit penny stocks
Oil prices tanked during the height of the novel coronavirus pandemic last year, and so did oil stocks. However, with the approval and dissemination of vaccines and other countermeasures, the global economy is experiencing a turnaround. The Oil and Gas ETF (NYSEARCA:XOP), for instance, is up an incredible 44% since the start of the year.
Reddit has been one of the biggest talking points among stock market circles this year. This because one of the forums on the platform induced one of the most monumental short squeezes in history. Needless to say, there is a lot of value to be derived for retail traders on the platform. Hence, I’ve compiled a list of Reddit penny stocks that could do well in the hot oil and gas sector:
88 Energy Limited (OTCMKTS:EEENF)
Kosmos Energy (NYSE:KOS)
Crescent Point Energy Corp. (NYSE:CPG)
Centennial Resource Development (NASDAQ:CDEV)
Ring Energy (NYSEAMERICAN:REI)
Gran Tierra Energy (NYSEAMERICAN:GTE)
Permian Basin Royalty Trust (NYSE:PBT)
Reddit Penny Stocks: 88 Energy Limited (EEENF)
88 Energy is an Australian upstream oil and gas operations company. It primarily operates in Australia and the U.S., but its assets in the latter far supersede those in the former. It operates several thousands of acres targeting oil on the northern slope of Alaska. The company has stakes in three main projects in the Alaskan slope: the Icewine Project, the Yukon Gold leases and the Peregrine Project. The positive developments in its business of late have helped EEENF stock gain an incredible 270% in the last three months.
The company appears to be zeroing in on its efforts to expand its presence in the Alaskan region further. Last year, it acquired its rival Australian energy company XCD energy to further cement its positioning in the region. Moreover, it entered into a binding agreement with Burgundy Exploration to expand its Icewine Project’s acreage to 231,000 net acres last year. Additionally, it also claims to have discovered potential hydrocarbon-bearing zones at its Peregrine Project. Therefore, with multiple tailwinds, 88 Energy has the potential to soar in the coming months.
Kosmos Energy (KOS)
Kosmos Energy is a U.S.-based independent oil and gas company that primarily focuses on the Atlantic Margins. Its core assets lie in the Gulf of Mexico, Ghana, Equatorial Guinea, Mauritania and Senegal. Perhaps the biggest catalyst that could drive its future growth is its deepwater LNG project called Greater Tortue. Despite the challenges presented by the pandemic, KOS stock is up an incredible 133% in the past six months.
The effects of the pandemic significantly impacted net production across its projects. So naturally, its revenues were down by double digits in each of the four quarters last year.
However, with the situation improving, you’d expect a significant rebound this year. What’s more promising is its Greater Torue project, which is on track to deliver in 2023. The project has a massive long-term potential from its logistical advantage in shipping to Asia, India and Europe. Therefore, Kosmos is sitting on a cash cow, which could steer it out of the penny stock territory.
Reddit Penny Stocks: Crescent Point Energy Corp. (CPG)
Crescent Point Energy Corp. explores, develops, and produces crude oil and natural gas reserves in the U.S. and Canada. At the conclusion of 2020, it had 411 million barrels of oil equivalent. Despite having a rough 2020, it has managed to beat earnings estimates in the past four quarters. Moreover, its forward EBIT growth is at an impressive 6.50%.
The biggest development with the company of-late is its acquisition of Shell’s Kaybob Duvernay assets in Alberta for $708.6 million. The company states that it adds 30,000 BOED (57% condensate, 8% NGL, and 35% shale gas) to its current portfolio. The condensate business holds a lot of importance in the Canadian market, so the acquisition has a lot of potential.
CPG stock stands to post hefty gains in the coming months when we see the results of its acquisitions reflected in its financials.
Centennial Resource Development (CDEV)
Centennial Resource Development is an independent oil and gas company that mainly focuses on the liquids-rich natural gas reserves in the Delaware Basin. The company owns 1,472 mineral acres and has acquired or leased roughly 81,657 net acres in the basin. It had a terrible 2020, but it expects to turn things around, with higher production and a more flexible balance sheet.
The company generated $580 million in revenues in 2020, which were significantly hampered by the pandemic. However, 2021 is expected to be much brighter for the company as revenues are forecasted at $813 million before hedges, with 59,500 BOEPD in production.
Moreover, it expects 52% of that production to be oil, which is a market that is booming at this time. Additionally, its management has done a commendable job in improving its financial flexibility. It issued $170 million in 3.25% senior notes due in 2028, with net proceeds of $164 million. Hence, with more breathing room and sales recovery, expect CDEV stock to continue killing it at the stock market.
Reddit Penny Stocks: Ring Energy (REI)
Ring Energy is an oil and gas exploration and production company primarily operating in Texas and New Mexico. As of December last year, it had proven reserves of 76.5 million barrels of oil equivalent. Moreover, it has interests in over 76,000 developed and undeveloped acres. It’s one of the best-performing penny stocks in the sector, as REI stock’s 12-month returns are at an incredible 186%.
The company did relatively well despite the unfavorable business conditions in 2020. It reduced its debt by $47 million in its fourth quarter and has plans to reduce its leverage further this year.
Moreover, it appears it will average 9,300 BOEPD in total barrels in 2021, which represents a 6% increase over 2020. However, due to its hedge position, it may experience a limited upside to the rising oil prices.
Gran Tierra Energy (GTE)
Gran Tierra Energy engages in the acquisition, development, and exploration of oil and gas properties in Colombia and Ecuador. At the conclusion of last year, it had undeveloped reserves of 26.2 million barrels of oil equivalent in the Columbian region.
Geopolitical risks had been weighing in on GTE stock last year, but its price has stabilized incredibly well in the past six months.
The company recently acquired new oil acreages in Colombia’s Llanos, Middle Magdalena Valley. The goal is to diversify its operations from its prime focus on the Putumayo Basin. Moreover, it is investing heavily in improving its existing operations and looking to curb operational failings. As a result, its first-quarter production volume this year is expected to be 24,463 barrels per day, which is 12% higher on a sequential basis.
Additionally, the company also reaffirmed its previous guidance for this year at an average of 28,000 to 30,000 barrels per day. Hence, things are looking highly promising for GTE stock, making it a solid penny stock bet.
Reddit Penny Stocks: Permian Basin Royalty Trust (PBT)
Permian Basin Royalty Trust is an express trust which holds interests in various oil and gas properties in the United States. Moreover, it owns a 75% royalty interest in Waddell Ranch properties, which owns 221 net productive oil wells. PBT took a hammering last year but is back to winning ways, posting a 54% gain in the past six months.
The average realized oil prices for PBT took a massive hit last year. The company generates roughly 80% of its revenues from oil wells. However, with the sector’s recovery, its fortunes are expected to turn around emphatically.
The compan boasts a healthy yield of 3.50% with a payout ratio of roughly 60%. Forward annual dividend payout is expected to be 14 cents and could continue growing for the foreseeable future.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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