In this article we will take a look at the 10 cheap oil stocks under $10. You can skip our detailed analysis of the oil industry’s outlook for 2021 and go directly to the 5 Cheap Oil Stocks Under $10.
Oil stocks got clobbered in 2020 as demand crashed and plants shuttered. The entire energy industry is still feeling the reverberations of the crisis and in flux amid the extreme volatility in oil prices. The companies behind the American shale boom are now struggling to generate substantial returns for their shareholders. A decade ago, oil and gas companies represented over 10% of the S&P 500 by market capitalization. Now this number has fallen to just 4% of the index. In 2019, the collective revenue generation of these companies in the Forbes Global 2000 list of largest companies was more than any other sector, as reported by GlobalData. Leading the list was the state-owned company, Saudi Aramco, which called itself the most profitable oil company in the world, generating a revenue of $111 billion during the 2019 fiscal year. Other industry leaders like Royal Dutch Shell plc (NYSE: RDS-A) also posted robust returns. However, some oil companies like Exxon Mobil Corporation (NYSE: XOM) struggled in 2019, with profits dropping by 15% compared to the previous year as the shift towards renewable and clean energy policies put a damper on its performance.
Overall, US oil companies like Chevron Corporation (NYSE: CVX), ConocoPhillips (NYSE: COP), and EOG Resources, Inc. (NYSE: EOG), have risen to record highs in the recent years. However, the broader industry is going through tough times as investors are becoming increasingly concerned about social, environmental, and governance issues, including climate change risks faced by fossil-fuel companies.
The coronavirus crisis plunged the oil industry into a brutal crash. The lack of demand due to nationwide lockdowns, along with the price war between Russia and Saudi Arabia sent the price of WTI crude futures under $12. By April 2020, global oil demand had fallen by 25%. The turmoil was so huge that the benchmark for US crude oil fell into the negative territory for the first time. Initially recovering from the slump in the start of the year, oil prices still averaged only $41.47 per barrel in 2020, as reported by Statista.
Investors have lost billions as the sector continues to struggle with a double-digit decline in demand and global production that threatens to pour more crude on an oversupplied market. Looking ahead, oil demand in 2021 is expected to recover but will remain lower than the pre-pandemic levels. Oil prices have underperformed in S&P index by 10-25% between July to November 2020, according to Deloitte’s 2021 oil and gas industry outlook.
According to the U.S. Energy Information Administration, global oil production averaged 91.5 million barrels per day in August which is about 9.7 million barrels per day below 2019 levels. S&P Global ratings also warned that it may cut the credit score on a number of major oil producers, including TOTAL SE (NYSE: TOT), Royal Dutch Shell plc (NYSE: RDS-A) and Exxon Mobil Corporation (NYSE: XOM).
Buy The Dip: Best Cheap Oil Stocks to Buy Under $10
There is no doubt that oil is a rough trade right now. Despite huge setbacks, the oil industry is still a multi-trillion-dollar business and there are many indicators that the situation is getting better. Companies such as Exxon Mobil Corporation (NYSE: XOM), Diamondback Energy, Inc. (NASDAQ: FANG), and Marathon Oil Corporation (NYSE: MRO) have posted double-digit gains this year, pointing to a strong recovery. The S&P 500 Energy Index is up 12% this year compared to 2020’s 37% plunge as reported by WorldOil. As the industry looks to offset the impact of policies that promote green energy and discourage the use of fossil fuels, analysts at Tudor, Pickering, Holt & Co. see gains of 20%-50% for exploration and production stocks under a scenario of Brent crude prices at $60 a barrel.
Although oil is a rough trade right now as prices remain volatile, it is hard to resist buying quality companies when prices reach such historic lows. Many notable US oil companies currently have their stocks trading under $10. The main features to look for in oil stocks include a manageable debt load, a stable dividend, and sufficient cash reserves. Energy firms like Williams Companies (NYSE: WMB) currently sport an 7% dividend yield. Many investors look at lower-priced stocks as an opportunity to not only earn good money but also to get a higher share count.
The oil industry isn't the only sector crushed by the pandemic. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Here is a list of 10 cheap oil stocks under $10:
10. PHX Minerals Inc. (NYSE: PHX)
Stock Price: $2.00 via Yahoo Finance
PHX Minerals Inc. is a natural gas and oil mineral company with a strategy to proactively grow its mineral position in its core areas of focus. PHX owns approximately 253,000 net mineral acres principally located in Texas, North Dakota, Oklahoma, Arkansas, and New Mexico. The company has announced that it has priced an underwritten public offering of 5,500,000 shares of the Company's common stock at a price to the public of $2.00 per share. The financial health and growth prospects of PHX, demonstrate its potential to outperform in the market. PHX has a market cap of $45.374 million and a revenue per share of $1.15, as reported by Yahoo Finance.
9. W&T Offshore, Inc. (NYSE: WTI)
Stock Price: $3.005 via Yahoo Finance
W&T Offshore, Inc. is an independent oil and natural gas production company with operations in the Gulf of Mexico. The company has interests in approximately 837,500 gross acres, including approximately 605,000 gross acres on the Gulf of Mexico Shelf and approximately 232,500 gross acres in the deep water. It currently has a market cap of $453.953 million with a profit margin of about 11.06% and revenue per share equal to $2.41. Moody's recently upgraded the company’s CFR to Caa1 and changed its stock outlook to stable. According to Jonathan Teitel, a Moody’s analyst, the upgrade reflects higher commodity prices that support continued positive free cash flow in 2021. W&T has also significantly reduced its debt since the end of 2019. With a stock price of $3.005 as of April 20, 2021, the company has earned a spot in the 10 cheap oil stocks under $10.
8. Crescent Point Energy Corp. (NYSE: CPG)
Stock Price: $3.81 via Yahoo Finance
Another Canadian-based oil and gas company has made the list of 10 cheap oil stocks under $10. Crescent Point Energy Corp operates in Calgary, Alberta, Denver, and Colorado. The primary focus of the company is light oil production in Southern Saskatchewan. Founded in 2001, the company has significantly increased its oil production and has been ranked as the 12th largest oil and gas producer in Canada. The company recently acquired Royal Dutch Shell’s RDS and has a market cap of $2.029 billion. Its revenue per share is $2.81 (ttm), according to Yahoo Finance, and the forward annual dividend yield is 0.20%. Crescent Point has an expected earnings growth rate of 120% for the current year as it counts operational excellence and prudent cost management as its strengths.
7. Southwestern Energy Company (NYSE: SWN)
Stock Price: $3.955 via Yahoo Finance
Southwestern Energy is a oil and natural gas exploration and production company which is headquartered in Spring, Texas. It is ranked 776th on the Fortune companies list. Its primary operations are located in the Appalachian Basin in West Virginia and Pennsylvania. As of 2020, the company had 11.990 trillion cubic feet of natural gas equivalent estimated proven reserves out of which 3% is petroleum. The company reported a quarterly revenue growth of 4.60% and its shares have added about 14.3%, outperforming the S&P 500. They reported a fourth-quarter revenue of 18 cents per share which was better than the projected numbers. This performance was supported by higher natural gas liquids production. With a stock price of only $3.955, estimates have been broadly trending upward for this stock.
6. Comstock Resources, Inc. (NYSE: CRK)
Stock Price: $4.94 via Yahoo Finance
An intriguing oil stock for investors right now is Comstock Resources, Inc. Headquartered in Frisco, Texas, Comstock is an independent energy company involved in the development, acquisition, production, and exploration of oil and natural gas. The company owns interests in about 1575 oil and natural gas producing wells and is currently operating in over 950 of these wells. With a market cap of $1.148 billion, the company has seen solid earnings estimate revision activity over the past few months which suggests that analysts are becoming more bullish on Comstock’s prospects in the long term. The current quarter estimates have risen from 13 cents per share to 16 cents per share, while current year estimates have risen from 64 cents per share to 67 cents per share. Comstock Resources shareholders have gained 15% for the year. Other estimates for the company are also moving higher. Its revenue per share is currently 3.99 (ttm), according to Yahoo Finance. 13 Wall Street equities research analysts have issued "buy," "hold," and "sell" ratings for Comstock Resources in the past year. There are currently 6 hold ratings and 7 buy ratings for the stock. The consensus among Wall Street equities research analysts is that investors should buy Comstock Resources stock, according to marketbeat.
Click to continue reading and see the 5 Cheap Oil Stocks Under $10.
Disclosure: None. 10 Cheap Oil Stocks Under $10 is originally published on Insider Monkey.