The US Flirts with SPR Release, but Energy Trend Points Higher (HP, HNRC, PDCE, PBF, CPE, SM, SWN)

The U.S. is eying the controversial step of tapping the Strategic Petroleum Reserve, a foundational deposit of oil housed in the US to act as an emergency reserve during times of geopolitical stress where energy access is in question. It was created in 1975 after the Arab oil embargo spiked gasoline prices and damaged the domestic economy. 

Administrations have reached into the reserve to pacify volatility in oil markets during war and weather-related issues over the past 45 years. But never before simply to stymie a persistent bull market. This is uncharted territory.

However, analysts do agree on one point: an oil pullback due to an SPR release is likely to be the next big buying opportunity in the oil and gas space.

As noted by the EIA earlier this week, these measures are unlikely to have any lasting impact on energy prices. Another way to think about it is this: unnaturally pushing the price of oil down through a policy measure like this is only going to stifle new investments in energy production, which will ultimately just lead to an even bigger upside price adjustment in energy markets.

And one thing we know from experience with these markets is that they tend to look around the corner and discount the longer-term future very well. Hence, we expect any dent in the energy markets from SPR chatter or actions to be short-lived and present a fresh bull opportunity for investors in related stocks.

With that in mind, we have put together a list of a few interesting opportunities in the space.

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 reported a net loss of $79 million, or $(0.74) per diluted share, from operating revenues of $344 million for the quarter ended September 30, 2021, compared to a net loss of $56 million, or $(0.52) per diluted share, on revenues of $332 million for the quarter ended June 30, 2021. The net losses per diluted share for the fourth and third quarters of fiscal year 2021 include $(0.12) and $0.05 of after-tax losses and gains, respectively, comprised of select item. 

President and CEO John Lindsay commented, “As we head towards 2022 we expect that the demand for H&P’s drilling solutions will continue to improve, and capital discipline, along with the help of strong commodity prices, will strengthen the industry. I am confident we are well-positioned to deliver value in this environment.

While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action HP shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -5% on above average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -5%. 

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).

Houston Natural Resources Corp. (OTC US:HNRC) is the most speculative name on our list today, but it deserves note given the company’s huge earnings success in its recent report and the big upside run underway in shares as the crowd starts to locate this small-cap player. 

The company also recently noted that it is preparing an SEC filing to become an SEC reporting company and plans on uplisting onto OTCQX or major exchange. Traders should also note that HNRC trades on a tiny float of just over 100k shares according to OTCmarkets.com, suggesting it could potentially fly on any new influx of interest.

Houston Natural Resources Corp. (OTC US:HNRC) is a diversified name with two main operating subsidiaries, Houston Natural Resources, Inc (HNRI) and Worldwide Diversified Holdings, Inc. (WDHI).HNRI owns oil and gas properties and a waste-water treatment plant that is dedicated to increase increasing stockholder value through recycling and remediation oil services. WDHI has business operations that provide products & services in the Information Technology & Healthcare markets.

HNRC most recently announced strong record-breaking financials for its September quarter, including total revenues for the nine months ended Sep 30 of $12,855,708 compared to $7,094,342, driving huge year-over-year growth of 81 percent. Earnings for the same period were also up big, nearly tripling. Just looking at the Q3 comps, revenues for the three months ended Sep 30 came in at $5,241,175 compared to $2,417,884, representing an increase of 117%, with earnings over the same period up 158% at $1.99 million. 

Frank Kristan, President of Houston Natural Resources Corp commented that: “We are delighted that our growth is continuing with strong third quarter results. The company’s increase in revenues and earnings has been due to an increase in services it provides to its portfolio companies with an increased volume of business from wastewater treatment and disposal facility located in Wilson County, Texas. This includes fee income from wastewater disposal treatment provided to producers and increased oil sales recovered from the wastewater treatment processing. We anticipate consistent growth from revenue and profit in 2022. The company is evaluating acquisitions of water treatment plants, oil and gas and other technology acquisitions.” 

Houston Natural Resources Corp. (OTC US:HNRC) also noted the big news that it has acquired approximately 2,800 acres of oil and gas leases located in the Halff Oil Field in Crockett County, Texas with proven and appraised reserves of $69 million and 83 oil wells to be reworked. HNRI subsidiary HNR Oil Services LLC has appraised assets of more than $7m. It recently completed financing for additional equipment to double its capacity in 2022.

PBF Energy Inc. (NYSE:PBF) engages in the operation of a petroleum refiner and supplies unbranded transportation fuels, heating oil, petrochemical feed stocks, lubricants, and other petroleum products in the United States. It operates through its Refining and Logistics segments. 

The Refining segment refines crude oil and other feed stocks into petroleum products. The Logistics segment owns, leases, operates, develops, and acquires crude oil and refined petroleum products terminals, pipelines, storage facilities, and logistics assets.

PBF Energy Inc. (NYSE:PBF) recently reported third quarter 2021 income from operations of $100.9 million as compared to loss from operations of $342.7 million for the third quarter of 2020. Excluding special items, third quarter 2021 income from operations was $101.0 million as compared to a loss from operations of $374.2 million for the third quarter of 2020. 

Tom Nimbley, PBF Energy’s Chairman and CEO, said, “PBF’s third quarter results reflect both the improving demand environment, as well as the continuing challenges facing our industry. During the quarter we successfully executed a significant turnaround at Torrance, conducted unplanned maintenance at Toledo and managed to navigate the turmoil delivered by Hurricane Ida on the Gulf Coast. Our Chalmette refining team safely brought the refinery down in advance of the storm. As a result, we experienced very little damage and were able to quickly resume operations after restoring power to the plant. We are very proud of the way our Chalmette team performed, even as many employees were dealing with their own storm-related hardships.”

Even in light of this news, PBF hasn’t really done much of anything over the past week, with shares logging no net movement over that period. PBF shares have been relatively flat over the past month of action, with very little net movement during that period. 

PBF Energy Inc. (NYSE:PBF) had no reported sales in its last quarterly financial data. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($1.5B against $4.2B, respectively).

Other key growth plays in the energy space right now include PDC Energy Inc. (Nasdaq:PDCE), Callon Petroleum Co. (NYSE:CPE), SM Energy Co. (NYSE:SM), and Southwestern Energy Co. (NYSE:SWN).

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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