Are we Sailing into a Perfect Storm for Energy Stocks? (PDCE, VKIN, HP, MTDR, CPE, PBF, CEI, XOP)

As if oil didn’t have enough on its mind: Now, the Wall Street Journal is reporting that key energy sector investors are saying they see Crude prices getting squeezed still higher due to market spillover dynamics from the extraordinarily tight natural gas complex.

This could represent a critical opportunity for active market participants.

According to a piece posted in the Journal this week (see here), “Oil’s move is really to do with the global energy crunch coming out of the gas power market,” said Norbert Rücker, head of economics at Swiss private bank Julius Baer. “This is now spilling over into the oil market because of the expectation that this energy scarcity means we’re going to use oil for spillover demand.” 

The plot twist is that, as noted in the piece, in some power plants, oil can be used to generate electricity when gas prices surge. In other words, oil – which is already teetering toward possible deficits on a monthly basis when comparing global supply and demand – could now see an extra force adding to the demand side helping to drive the true potential for a shortage.

Note that this is coming in the context of an already stressed oil market, driven toward tight conditions by a lack of investment in new production capacity over the past two years as well as a shift in the culture of companies that survived last year’s April crash to negative-forty-dollars-per-barrel on Covid-related shutdowns. That shift was partly Darwinian, eradicating small oil producers given to chasing the market higher with leverage and rising production and preserving only the more conservative players. As a result, supply has become more inelastic outside of the OPEC+ complex, which grants OPEC+ members more freedom to let the price appreciate without a fear that it will threaten market share.

This combination of factors has been something of a perfect storm that now could have oil poised for another major breakout.

With that in mind, we look at a few stocks that live right at the key intersection of “Energy” and “Growth” that stands to be potentially so important to future portfolio returns for active market participants.

PDC Energy Inc (NASDAQ:PDCE) bills itself as a company that engages in the exploration and production of oil and natural gas. PDCE shares recently broke out to new multi-year highs above the key $50 level as investors continue to power into the small and mid-cap energy space.

PDC acquires, explores, and develops properties for the production of crude oil, natural gas, and natural gas liquids. Its primary operations are located in the Wattenberg Field in Colorado and the Delaware Basin in Texas.

PDC Energy Inc (NASDAQ:PDCE) recently announced the publication of its 2021 Sustainability Report, highlighting the Company’s continued efforts and commitments to responsibly developing oil and natural gas. The report highlights the Company’s goal of increased transparency and accountability, while further aligning with the Sustainability Accounting Standards Board (SASB) and other frameworks. Further, it includes new data points identified as material by the Company and its stakeholders, including year-over-year emissions performance, reductions in flaring intensity, a heightened focus on corporate diversity and inclusion and commitment to corporate social responsibility.

Bart Brookman, President and CEO, stated, “Our approach to ESG is both thoughtful and ambitious, focused on continuous improvement in our key focus areas and designed to position our company for long-term success. We are proud to release our 2021 report, which showcases our robust disclosure, strong ESG governance and commitment to safe and environmentally-protective operations in Colorado and Texas.”

The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 8% in that timeframe. Shares of the stock have powered higher over the past month, rallying roughly 15% in that time on strong overall action. 

PDC Energy Inc (NASDAQ:PDCE) managed to rope in revenues totaling $537.1M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 206.6%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($109.7M against $1.2B, respectively).

Viking Energy Group Inc (OTC US:VKIN) is another interesting player living at the crossroads between growth and energy production. The company is a more speculative name, but it is majority owned by Camber Energy Inc (NYSEAMERICAN:CEI), which recently raised $15 million in non-toxic financing.

This gives VKIN a great foundation for future growth to add to its strong exposure profile, which includes oil and gas assets located in North America in Kansas, Missouri, Texas, Louisiana, and Mississippi.

Viking Energy Group Inc (OTC US:VKIN) is also emerging as a key player in the incipient boom that is the carbon capture theme. As it recently announced, Viking has entered into an Exclusive Intellectual Property License Agreement with ESG Clean Energy regarding ESG’s patent rights and know-how related to stationary electric power generation, including methods to utilize heat and capture carbon dioxide.

According to the release, the ESG Clean Energy System is designed to generate clean electricity from internal combustion engines and utilize waste heat to capture ~ 100% of the carbon dioxide (CO2) emitted from the engine without loss of efficiency, and in a manner to facilitate the production of precious commodities (e.g., distilled/ de-ionized water; UREA (NH4); ammonia (NH3); ethanol; and methanol) for sale.    

James Doris, President and Chief Executive Officer of Viking, commented, “In my view this transaction positions us as an industry leader in terms of being able to assist with the power generation needs of commercial and industrial organizations while at the same time helping them reduce their carbon footprint to satisfy regulatory requirements or to simply follow best ESG-practices. We are excited to be able to use the platform of Simson-Maxwell Ltd., our recently acquired majority-owned subsidiary, to promote the ESG Clean Energy System.”

Viking Energy Group Inc (OTC US:VKIN) shares have been on fire of late, launching from $0.50 to over $3.50 in the past month as the crowd begins to discover this interesting energy player. One key point that suggests this rampage could continue is the stock’s 7-million share float paired with its very strong growth metrics. It also has in-ground natural gas assets on the books, which helps to drive the action given the massive squeeze going on in that market.

Helmerich & Payne, Inc. (NYSE:HP) engages in contract drilling of oil and gas well. It operates through the following segments: North America Solutions, Offshore Gulf of Mexico, and International Solutions. 

The North America Solutions segment operates its drilling business primarily North America and have a presence in most of the U.S. shale and unconventional basins. The Offshore Gulf of Mexico segment conducts its business in the Gulf of Mexico. The International Solutions segment operates in six international locations including Argentina, Colombia, Bahrain, and United Arab Emirates.

Helmerich & Payne, Inc. (NYSE:HP) recently announced that it has successfully completed its previously announced private offering of $550 million aggregate principal amount of 2.900% senior notes due 2031.

President and CEO John Lindsay commented, “This offering exemplifies our ability to plan for the long term and to strategically eliminate certain potential risks we may encounter in the future. We are taking advantage of the Company’s robust financial profile and the historically low interest rate environment to significantly extend our debt maturity at a lower rate. Due to our strong balance sheet, we are able to capitalize on the current market opportunity to lock in low cost capital that will allow us to continue to grow our domestic market share through expansion of new commercial models and digital technology solutions. Concurrently, we will continue our efforts to expand our international business while using our core competencies and resources to develop additional capabilities and opportunities.”

The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 8% in that timeframe. Shares of the stock have powered higher over the past month, rallying roughly 3% in that time on strong overall action. 

Helmerich & Payne, Inc. (NYSE:HP) managed to rope in revenues totaling $332.2M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 4.7%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($606.2M against $265.3M).

Other key stocks at the intersection of Energy and Growth include Renewable Energy Group Inc (NASDAQ:REGI), Matador Resources Co (NYSE:MTDR), Callon Petroleum Company (NYSE:CPE), PBF Energy Inc (NYSE:PBF), and SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA:XOP).

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Published by Brendan Byrne

While studying economics, Brendan found himself comfortably falling down the rabbit hole of restaurant work, ultimately opening a consulting business and working as a private wine buyer. On a whim, he moved to China, and in his first week following a triumphant pub quiz victory, he found himself bleeding on the floor based on his arrogance. The same man who put him there offered him a job lecturing for the University of Wales in various sister universities throughout the Middle Kingdom. While primarily lecturing in descriptive and comparative statistics, Brendan simultaneously earned an Msc in Banking and International Finance from the University of Wales-Bangor. He's presently doing something he hates, respecting French people. Well, two, his wife and her mother in the lovely town of Antigua, Guatemala. You may contact Brendan via his email (brendanbyrne@wallstreetpr.com) or his Google+ page (https://plus.google.com/u/0/116608759701551457422).

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