How to Capitalize on the Next Leg of the Oil Bull Market (CEI, PXD, MTDR, FANG, HP, HES, OIH, XOP, VKIN)

Bank of America recently came out with a reaffirmation of their call for $100 Crude Oil. This projection is hardly a shocking outlier. We have seen analysts go all the way up to $150 oil on the way – which would be a new all-time high in nominal terms. But what’s driving these lofty estimates?

The key here is to remember that commodity markets aren’t just about “demand”. Supply is a major component – in fact, it’s half the story. Literally.

And the oil market is absolutely defined right now by problematic supply dynamics that have their roots two big themes: 1) the sustainable energy paradigm change, and 2) an industrial scale case of “PTSD” following the most dramatic demand crash in oil market history last spring.

That second point is important. A number of companies failed in a matter of weeks when the crash hit after Russia and Saudi Arabia had a falling out that was quickly followed by the onset of a massive wave of Covid-related lockdowns in March and April of 2020. The producers who survived were those with conservative philosophies around production – those rooted in the notion that it’s dangerous to over-invest in ramping production on oil price rallies, and those willing to keep plenty of hedges on because things can turn south at any time. 

The small-cap oil producer space is now entirely comprised of those more conservative teams. The cowboys were culled in the crash.

The first point is also important. We are seeing boards taken over by activists working to scale oil companies out of the oil business and curtail investments in new production capacity. We are seeing judges, politicians, and ESG investors push in the same direction.

The winds of change are blowing toward a broad phase-out of fossil fuels over the next 10-20 years. That’s no secret. But in the intermediate term, that same process could easily push us toward a major oil shortage.

It should also be noted that both of these trends have left OPEC in full control for the first time in over a decade. And the folks at OPEC know how to run the price up when they have full control – when they have no reason to fear a loss of market share if they restrain production hikes.

That suggests companies with growing production activity and solid financial foundations in the US oil space could be set for profound tailwinds in the months ahead. With that in mind, we take a look at a handful of interesting energy growth stocks that may be of interest to investors and speculators looking for fresh opportunities.

Pioneer Natural Resources Co (NYSE:PXD) has been one of the best performing names in the oil space over the past year precisely because it doesn’t do a whole lot of hedging and appears to be lined up to benefit significantly from sustained upside in the price of oil. But PXD management was able to avoid catastrophic damage last spring, so these folks know what they’re doing on both sides of the equation, which makes the stock particularly interesting as Delta presents a constant risk.

According to its materials, the company operates as an independent oil and gas exploration and production player in the shale space, with active projects in the Permian Basin, Eagle Ford Shale, Rockies, and West Panhandle sites.

Pioneer Natural Resources Co (NYSE:PXD) recently announced the publication of its 2021 Sustainability Report, highlighting the Company’s focus and significant progress on environmental, social and governance (ESG) programs. The comprehensive report highlights the Company’s Net Zero ambition by 2050 and enhanced emissions reduction targets for greenhouse gas (GHG) and methane. In addition, the report details the Company’s 2020 performance, including enhanced disclosures on air emissions, water management practices, diversity, equity and inclusion, board governance and community engagement.

CEO Scott D. Sheffield stated, “Our board of directors, management team and employees are committed to ensuring Pioneer remains an ESG leader. We are dedicated to reducing our emissions intensities, being proactive and transparent in our engagement with stakeholders and the communities in which we operate and ensuring our governance policies and performance metrics align with our ESG goals. These efforts, in conjunction with Pioneer’s low breakeven costs, low-emissions intensity, strong balance sheet and highly-skilled and diverse workforce, position the Company for continued long-term success.”

If you’re long this stock, then you’re liking how the stock has responded to the announcement. PXD shares have been moving higher over the past week overall, pushing about 9% to the upside on above average trading volume. 

Pioneer Natural Resources Co (NYSE:PXD) managed to rope in revenues totaling $4.3B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 274.1%, 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 ($298M against $4.3B, respectively).

Camber Energy Inc (NYSEAMERICAN:CEI), and its majority-owned subsidiary, Viking Energy Group Inc (OTC US:VKIN), recently announced a deal granting access to large financing on very strong terms. Both stocks have been on a tear after announcing a deal that sends them into the core of the carbon capture conversation. Moreover, CEI is a very small, rapidly growing, dirt-cheap oil producer with a growing production footprint. It’s exactly the kind of small-cap energy play capable of big things when the retail investor spotlight turns to oil stocks in a strong oil rally, as we have been seeing over the past few weeks.

The company and its subsidiaries own and invest in oil and gas assets located in North America in Kansas, Missouri, Texas, Louisiana, and Mississippi. With its firm financial backing, one can easily imagine a lot of expansion opportunity here as well.

Camber Energy Inc (NYSEAMERICAN:CEI) recently announced that its majority-owned subsidiary, Viking Energy, entered into an Exclusive Intellectual Property License Agreement with ESG Clean Energy, LLC regarding ESG’s patent rights and know-how related to stationary electric power generation, including methods to utilize heat and capture carbon dioxide. The license is exclusive for all of Canada, and is non-exclusive for up to twenty-five locations in the United States.

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

James Doris, President and Chief Executive Officer of Camber, 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.”

Camber Energy Inc (NYSEAMERICAN:CEI) has been a momentum favorite in the market over recent weeks, ascending to the status of a “meme stock” due to the surging retail investor interest that seems to be involved at this point. That said, one shouldn’t get the idea that this is somehow mispriced due to that process. This is a growth stock in a hot market space with powerful macro fundamental tailwinds. We would also suggest that it is coming from a deep discount level, which could very well mean it has the potential to run significantly higher as interest builds.

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 Belgacem Chariag was appointed to the Company’s Board of Directors. Chariag is currently the Chairman, President and Chief Executive Officer of PQ Group Holdings, a leading integrated and innovative global provider of specialty catalysts, materials, chemicals and services. He served in multiple positions with Baker Hughes in his 9-year tenure where he rose to Chief Global Operations Officer. Prior to that role he served as President, Eastern Hemisphere; President, Global Products and Services; Chief Integration Officer; and President Global Operations. He also held various senior level positions during his 20-years with Schlumberger.

Chairman of the Board, Hans Helmerich stated, “We are pleased to have Belgacem join our Board of Directors. His broad and deep experience in oil field services worldwide, along with his understanding of changing and complex energy markets, will bring a valuable perspective.”

Even in light of this news, HP hasn’t really done much of anything over the past week, with shares logging no net movement over that period. 

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 tickers of interest in this space include Matador Resources Co (NYSE:MTDR), Diamondback Energy Inc (NASDAQ:FANG), Hess Corp. (NYSE:HES), VanEck Oil Services ETF (NYSEARCA:OIH), and SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA:XOP).

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Published by Chris Brown

About Me: I have a Phd in Economics Gender: Male Interests: Playing games like cricket, volleyball Favorite Music: hip hop, rock, jazz

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