As we kick off 2022, it’s worth noting that Blackrock’s legendary investment manager, Byron Wien, once again put out his Top Ten Surprises list for the new year. Officially put out in tandem with Joe Zidle, Chief Investment Strategist in the Private Wealth Solutions group at Blackstone, the list is titled “Byron and Joe’s Ten Surprises of 2022”.
Closely watched by top professional managers, this marks the 37th consecutive year Wien has put out his list, which has become an iconic part of the calendar change on Wall Street.
The list is rife with insight once again this year and, possibly more than any other theme, it highlights the opportunity in oil stocks, with three of its items directly focusing on the growing supply-and-demand issue in the oil space:
“While the major oil-producing countries conclude that high oil prices are speeding up the implementation of alternative energy programs and allowing US shale producers to become profitable again, these countries can’t increase production enough to meet demand. The price of West Texas crude confounds forward curves and analyst forecasts when it rises above $100 per barrel.”
“In a setback to its green energy program, the United States finds it cannot buy enough lithium batteries to power the electric vehicles planned for production. China controls the lithium market, as well as the markets for the cobalt and nickel used in making the transmission rods, and it opts to reserve most of the supply of these commodities for domestic use.”
“In spite of the Omicron variant, group meetings and convention gatherings return to pre-pandemic levels by the end of the year. While Covid remains a problem throughout both the developed and the less-developed world, normal conditions are largely restored in the US. People spend three to four a days a week in offices and return to theaters, concerts, and sports arenas en masse.”
In other words, look for the end of the pandemic on a social level, hiccups in the transition away from fossil fuels, and skyrocketing oil prices based on a failure to push production in step with demand.
That puts oil stocks back in the spotlight in 2022. With that in mind, we take a closer look at the group below, along some of the most interesting stories and recent catalysts in the space.
Diamondback Energy Inc. (Nasdaq:FANG) is an independent oil and natural gas company, which engages in the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves. It operates through the Upstream and Midstream Services segments.
The Upstream segment focuses on the Permian Basin operations in West Texas. The Midstream Services segment involves in the Midland and Delaware Basins.
Diamondback Energy Inc. (Nasdaq:FANG) recently announced a series of leadership changes. Russell Pantermuehl, currently Executive Vice President and Chief Engineer, will retire from his current role at the end of 2021 after having worked at Diamondback since August 2011, prior to the Company’s initial public offering. Russell and the Company have agreed that following his retirement he will serve as an advisor to Diamondback through December 31, 2022 in a limited role.
Al Barkmann, currently Vice President of Reservoir Engineering, has been promoted to Senior Vice President of Reservoir Engineering, and will assume many of Russell’s prior responsibilities, reporting to Danny Wesson, EVP of Operations. Also, Yong Cho, currently Vice President of Drilling, has been promoted to Senior Vice President of Drilling and will continue reporting to Danny. These changes are effective immediately. “I would like to express my sincere gratitude to Russell for his significant contribution to Diamondback over the past decade. His legacy of technical excellence and character will leave a lasting impact on the Company. I have had the privilege of working with Russell for multiple decades and have witnessed firsthand his influence on the oil and gas industry over a 40-year career. He has had a significant positive effect on all those he has worked with and has been a mentor to countless individuals. I wish him all the best in his retirement and look forward to his continued contributions to Diamondback in his new role,” stated Travis Stice, Chief Executive Officer of Diamondback.
Even with that news, the action hasn’t really heated up in the stock, with shares moving net sideways over the past week.
Diamondback Energy Inc. (Nasdaq:FANG) managed to rope in revenues totaling $1.9B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 165.3%, 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 ($475M against $2B, respectively).
Camber Energy Inc (NYSE American:CEI) has strong operations tied to its 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. In addition, the stock has been sharply devalued by a potentially suspect “short report” from a bear fund a couple months ago.
Camber Energy Inc. (NYSE American:CEI) most recently announced that it effected favorable amendments to certain outstanding promissory notes in the aggregate principal amount of $20.5 million, as a result of the Company increasing its authorized capital on December 30, 2021.
That announcement follows its prior announcement from a few days earlier that significantly reduced its outstanding preferred stock to the benefit of its common stockholders.
Specifically, the company announced that, on December 24, 2021, it 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 (the “Loan”). Proceeds of the Loan are to be used (i) 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; (ii) to pay all secured loans due and payable within ninety days of the Closing; and (ii) to the extent the above items are satisfied and there are surplus proceeds available, for working capital purposes.
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 its VKIN subsidiary’s shares sold short over recent trading sessions according to OTCshortreport.com. If oil is setting up for a fresh run to kick off 2022, the potential for a squeeze in CEI could be significant, especially given that the stock has been adopted by meme stock groups whenever it shows a bit of upside mojo.
Exxon Mobil Corp. (NYSE:XOM) engages in the exploration, development, and distribution of oil, gas, and petroleum products. It operates through its Upstream, Downstream and Chemical segments.
The Upstream segment produces crude oil and natural gas. The Downstream segment manufactures and trades petroleum products. The Chemical segment offers petrochemicals.
Exxon Mobil Corp. (NYSE:XOM) recently announced that Materia, Inc., a high-performance structural materials company that has pioneered the development of a Nobel Prize-winning technology for making a new class of polymers, today announced that it has been acquired by ExxonMobil Chemical Company, a division of ExxonMobil Corporation. This acquisition couples Materia’s Nobel Prize-winning technology with ExxonMobil’s complimentary proprietary processes and world-class manufacturing capabilities to bring these new sustainable structural polymers to greater commercial scale.
“Materia’s flagship polymer family, ProximaTM, draws upon the ROMP catalyst technology to produce hydrocarbon based products with significant performance and sustainability advantages,” said Cliff Post, Materia’s president and CEO, “This technology can be used to form composites that exhibit strength and stiffness equivalent to steel, with significantly reduced weight.”
If you’re long this stock, then you’re liking how the stock has responded to the announcement. XOM shares have been moving higher over the past week overall, pushing about 3% to the upside on above average trading volume.
Exxon Mobil Corp. (NYSE:XOM) pulled in revenues totaling $73.5B in its most recently reported quarterly financial data, driving top line growth of 60.7%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($4.8B against $61.9B, respectively).
Other key tickers in the oil space include Pioneer Natural Resources Co. (NYSE:PXD), Hess Corp. (NYSE:HES), Coterra Energy Inc. (NYSE:CTRA), SilverBow Resources Inc. (NYSE:SBOW), SM Energy Co. (NYSE:SM), and the VanEck Oil Services ETF (NYSEArca:OIH).
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