Pandemic End in Sight Small Cap Oil Stocks Poised for Success? (PDCE, CEI, HP, MTDR, CPE, PBF, XOP, VKIN)

The Crude Oil market has taken flight over the past five days, powering over 15% higher in that time in a move fueled by optimism around the big-picture consequences of the Omicron variant. According to a recent South African study, infection with the recently emerged aggressively contagious but less severe variant appears to confer immunity against the more severe Delta variant that became dominant over the summer.

While you might think this is unsurprising, experts have been concerned that, since infection with the Delta variant does not protect you against Omicron, the potential exists that the two viruses could exist side by side as a twin pandemic. 

However, if Omicron infection protects against Delta, then a much better outcome presents itself.

If the new South African study is confirmed through further analysis, it could spell the imminent end of the pandemic because it would mean the rapid global spread of the Omicron variant may permanently displace other variants with a less deadly version of the coronavirus, potentially taking it off the front page for the first time since it emerged early last year.

That has particularly powerful implications for crude oil because an end to the societal phenomenon of the pandemic will likely sharply boost travel, upping demand for jet fuel and gasoline. 

Given widely known supply constraint dynamics embedded in the forward outlook for oil, a jump in 2022 demand forecasts could force a major squeeze in the oil market.

With that in mind, we take a look below at some of the stocks that most stand to benefit from this emerging theme.

 

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

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, along with ADNOC Drilling Company PJSC, the finalization of the Rig Enablement Framework Agreement, which is intended to advance ADNOC Drilling’s land rig operational performance, as well as support its ambitious growth and expansion plans. Focused on improving drilling efficiencies and unlocking operational savings, the Framework Agreement builds on the Asset Purchase Agreement and IPO Cornerstone Agreement announced on September 8, 2021, further strengthening the strategic alliance between ADNOC Drilling and H&P.

Abdulrahman Abdullah Al Seiari, CEO of ADNOC Drilling, said: “The Rig Enablement Framework Agreement announced today is a natural evolution of both our strategic alliance with H&P and ADNOC Drilling’s growth trajectory. By sharing global best practices and further optimizing our world-class rig fleet, this agreement turbocharges ADNOC Drilling’s significant competitive advantage, enabling us to further capitalize on and cement our leading position as the largest national drilling company in the Middle East and the only national drilling company that offers start-to-finish well services. The resulting efficiency gains will deliver enhanced operational excellence, in turn delivering even greater value to our shareholders.”

The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 9% in that timeframe. Shares of the stock have powered higher over the past month, rallying roughly 6% in that time on strong overall action. 

Helmerich & Payne Inc. (NYSE:HP) managed to rope in revenues totaling $343.8M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 65.1%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($1.1B against $866.3M).

 

Camber Energy Inc (NYSE American:CEI) is a recent speculative darling trading at rock-bottom prices after a bear fund put out a potentially dubious short report in September. Given this context, shares of CEI may get awfully interesting into the end of the year given the stock’s strong hold of key support this month – after breaking down to $0.75/share, the stock has popped back up to challenge its 200-day moving average around $1/share in a short span.

CEI has exposure to oil and gas assets through its majority-owned subsidiary, Viking Energy Group Inc (OTC US:VKIN), which has energy assets located in North America in Kansas, Missouri, Texas, Louisiana, and Mississippi. It has also gained exposure to the carbon capture theme through a recent 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.

Camber Energy Inc. (NYSE American:CEI) most recently announced that, on December 24, the company reportedly entered into a Loan Agreement pursuant to which the lender, subject to certain conditions, irrevocably agreed to loan the Company $25,000,000 on December 31, 2021. 

According to the company’s release, proceeds from the loan will be used to redeem all issued and outstanding shares of Series C Redeemable Convertible Preferred Stock of the Company not beneficially owned by the lender or its affiliates, to pay all secured loans due and payable within ninety days of the Closing, and for working capital purposes to the extent the above items are satisfied and there are surplus proceeds available.

James Doris, President and Chief Executive Officer of Camber, commented, “I believe the financing terms are the most favorable terms the company has been able to negotiate in its history. The proposed transaction demonstrates the lender’s confidence in our team and overall growth strategy, and if we are successful at the upcoming special meeting the company will be in a great position to pursue new acquisitions and other important initiatives our team has identified.”

Camber Energy Inc. (NYSE American:CEI) has seen more than half of the shares of its VKIN subsidiary sold short over the past month. Given the strength we see now in the oil market, an underpriced and over-shorted small cap like CEI could be a prime candidate for a squeeze, especially given its history as a favorite among meme stock traders on the Reddit social media platform, which has become synonymous with the meme stock phenomenon during the past 12 months.

 

Callon Petroleum Co. (NYSE:CPE) bills itself as a company involved in the exploration, development, acquisition and production of oil and natural gas properties in the United States. 

Moreover, the company focuses on unconventional oil and natural gas reserves in the Permian Basin.

Callon Petroleum Co. (NYSE:CPE) recently announced the appointment of Mary Shafer-Malicki to its Board of Directors. Ms. Shafer-Malicki brings valuable experience in energy, governance, and strategy to the Callon Board. Over a career spanning more than 25 years at BP, she held domestic and international leadership roles across the energy value chain, including as CEO of BP Angola. Her significant board experience includes service as Chairman of the Board for QEP Resources and as a board member for Wood plc, McDermott International Inc., and Ausenco Limited over the past ten years. Ms. Shafer-Malicki holds a Bachelor of Science in Chemical Engineering from Oklahoma State University.

Richard Flury, Chairman of the Board, commented, “We are excited to welcome Mary as an independent director to our Board. Her breadth of experience as an energy executive and corporate director will provide invaluable perspectives and complement the existing strengths of the Callon board. With three board members retiring over the next three years starting in May 2022, Mary solidifies our energy industry skill sets for the coming years. Importantly, this appointment is another example of our continuous process of thoughtful board refreshment and leading corporate governance practices that will ensure diversity of thought in the pursuit of sustainable value for all stakeholders.”

The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 23% in that timeframe. CPE shares have been relatively flat over the past month of action, with very little net movement during that period. 

Callon Petroleum Co. (NYSE:CPE) pulled in revenues of $552.6M in its most recently reported quarterly data, pushing powerful topline growth of 90.5% on a year-over-year basis. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($3.7M against $828.4M, respectively).

 

Other key tickers in the small-cap oil space include PDC Energy Inc. (Nasdaq:PDCE), Matador Resources Co. (NYSE:MTDR), PBF Energy Inc. (NYSE:PBF), and the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca:XOP).

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Published by Donna Fago

I believe in writing content Informing investors with the knowledge they need to invest better today- I have been following the markets for many years and was asked to join the team at WallStreetPR.com recently due to my passion for the markets.

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