3 energy stocks under $15 to buy as oil prices remain near multi-year highs
Oil prices broke through the $90 per barrel mark Wednesday, posting its highest level in eight years, as oil supply remains tight and Russia’s potential invasion of Ukraine has led to sharp increases in energy prices. U.S. Brent Crude and West Texas Intermediate crude futures both gained more than 2% to $90.07 a barrel and $87.43 a barrel, respectively.
Credit rating and risk analysis company, Moody’s Investor Service, predicted that demand for fossil fuels would exceed pre-pandemic levels this year, despite administrative commitments to reduce greenhouse gas emissions. Energy prices are expected to remain high, due to strong demand and uncertain supply. Investor interest in the energy sector is evident in Energy Select Sector SPDR (XLE) gains of 60% over the past year versus the broader SPDR S&P 500 ETF Trust (TO SPY) yields of 12.9%.
Therefore, fundamentally sound energy stocks, Archrock, Inc. (AROC), NOW Inc. (DNOW) and SandRidge Energy, Inc. (South Dakota), could be solid buys. These stocks are trading below $15.
Archrock, Inc. (AROC)
AROC is an energy infrastructure company operating in the United States. The Company operates through the two major segments of Contract Operations and Aftermarket Services; and designs, owns, installs, repairs and maintains its fleet of natural gas compression equipment. It also provides maintenance, overhaul and reconfiguration services.
On October 28, AROC declared a quarterly dividend of $0.145 per common share, or $0.58 per share on an annualized basis, which was payable to shareholders on November 16. This reflects the company’s ability to generate cash and reward shareholders.
AROC’s aftermarket service revenue increased 19.2% year-over-year to $36.26 million in the fiscal third quarter ended September 30, while gross margin after-sales services increased by 19.2% over the year-ago quarter to $5.60 million. The company’s free cash flow was $120.83 million, up 20.3% from the same period last year.
Analysts expect AROC’s EPS to rise 76.5% year-over-year to $0.30 for fiscal 2022. Similarly, Street expects revenue of the same year increased by 6.5% compared to the previous year to reach 873.56 million dollars.
Shares of AROC have gained 13.1% over the past month and 3.3% over the past five days to close yesterday’s trading session at $8.52.
AROC’s solid fundamentals are reflected in its POWR Rankings. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
AROC has a B rating for Momentum and Quality. In stock 41 Energy – Services industry, it is ranked #4. To view additional POWR ratings for Growth, Value, Stability and Sentiment, Click here.
NOW Inc. (DNOW)
DNOW is a distributor of energy and industrial downstream products used in petroleum refining, chemical processing, LNG terminals and industrial manufacturing operations. The company markets its products under the DistributionNOW and DNOW brands.
On December 17, DNOW announced an amendment to its Senior Secured Credit facility with a syndicate of lenders. The amended credit facility extends the maturity date to 2026 and is expected to provide cost savings and other improved terms.
For the third fiscal quarter ended September 30, DNOW’s revenue increased 34.7% year-over-year to $439 million. Non-GAAP net income and non-GAAP EPS, excluding other costs, were $6 million and $0.05, showing a substantial increase from their negative values in the prior year.
The consensus EPS estimate of $0.03 for the fourth quarter (ending December 2021) indicates a 112% year-over-year increase. Similarly, the consensus revenue estimate for the same period of $426.10 million reflects a 33.6% improvement over the prior year quarter. Additionally, DNOW has an impressive surprise earnings history, as it has exceeded consensus EPS estimates in three of the past four quarters.
The stock has gained 10.1% over the past year and 21.4% over the past three months to close yesterday’s trading session at $8.92.
It’s no surprise that DNOW has an overall rating of B, which translates to Buy in our POWR rating system. The stock has a B rating for growth, momentum and quality. It is ranked #5 in the Energy – Services industry. Click here to see additional POWR ratings for DNOW (Value, Stability, and Sentiment).
SandRidge Energy, Inc. (South Dakota)
SD acquires, develops and produces oil and natural gas. The company primarily operates in the mid-continent of the Americas.
As of September 30, SD has returned to production 106 wells that had been shut down due to lower commodity prices in 2020. The company said it is exploring the potential for the capture, use and sequestration of (CCUS) and its technical and commercial feasibility. with its existing asset base. This could prove beneficial for the business.
SD’s total revenue increased 68.3% year-over-year to $46.58 million during the third fiscal quarter ended Sept. 30. Adjusted EBITDA increased 117.4% over the prior year period to $33.54 million. Adjusted net earnings available to common shareholders and adjusted net earnings per share improved 443.5% and 433.3% over the same period last year to $29.44 million and $0, respectively. $.80.
Over the past year, SD stock has gained 133% to close yesterday’s trading session at $10.44. It has gained 78.2% over the past six months.
This promising outlook is reflected in SD’s POWR ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
SD has a Momentum and Quality rating of A, and a Growth and Value rating of B. Energy – Drilling the industry, it is ranked #1. In addition to the POWR ratings that we have indicated above, we can see the SD ratings for stability and feeling here.
AROC shares were trading at $8.30 per share on Thursday afternoon, down $0.22 (-2.58%). Year-to-date, AROC has gained 10.96%, compared to a -9.34% rise in the benchmark S&P 500 over the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. Following…