On Wednesday, President Biden announced that the Energy Department would sell the remaining 15 million barrels out of the U.S. strategic petroleum reserve, aiming to lower gas prices before the mid-term elections. Biden has also stated that the administration would start filling the reserves not before oil prices drop to $70 a barrel.
Recently OPEC has also slashed its oil demand growth estimates for 2022 and 2023. OPEC lowered its estimates by 460,000 barrels per day (bpd) for 2022 and by 360,000 bpd for 2023. The cartel expects demand growth to be impeded by global economic headwinds and uncertainties.
Amid such a market backdrop, it might be wise to avoid fundamentally weak energy stocks Frontline Ltd. (FRO), Tellurian Inc. (TELL), and Camber Energy, Inc. (CEI) in the fourth quarter.
Frontline Ltd. (FRO)
FRO is a shipping company that engages in the seaborne transportation of crude oil and oil products. The company is involved in the charter, purchase, and sale of vessels and owns and operates oil and product tankers.
In July, the company announced that it had entered a combination agreement with Euronav N.V. (EURN) for a stock-for-stock combination based on an exchange ratio of 1.45 FRO-shares for every 1.0 EURN-share. The combined group is expected to create a leading global independent oil tanker owner and operator.
FRO’s total operating expenses for the fiscal second quarter that ended June 2022 increased 30.4% year-over-year to $237.80 million. Net cash used in investing activities rose 19.8% from the prior-year period to $148.45 million. Its cash, cash equivalents, and restricted cash balance decreased 15.3% from the year-ago value to $119.81 million.
Analysts expect EPS to be $0.43 for the quarter ending December 2022. For the same period, revenue is expected to be $244 million.
Over the past month, the stock has lost 9.4% to close the last trading session at $12.45. It has dropped 2.7% intraday.
FRO’s POWR Ratings reflect its poor prospects. The stock has an overall rating of D, which translates to Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FRO is also rated a D for Value and Stability. In the Energy - Oil & Gas industry, it is ranked #88 out of 118 stocks.
In addition to the above, to see the additional POWR Ratings for Growth, Momentum, Sentiment, and Quality for FRO, click here.
Tellurian Inc. (TELL)
TELL operates natural gas businesses worldwide. The company engages in developing natural gas production, LNG marketing, and infrastructure asset portfolios.
On September 19, TELL announced that due to uncertain conditions in the high-yield market, it had withdrawn its proposed public offering of units which consisted of 11.25% senior secure notes due 2027 and warrants to purchase shares of its common stock.
The company lost two of its biggest potential customers in the same month - Shell plc (SHEL) and Vitol SA. TELL had scrapped energy deals with both companies after withdrawing the high-yield bond sale that would have funded the initial construction of its proposed multi-billion dollar Driftwood LNG plants in Louisiana.
TELL’s total current liabilities came in at $237.94 million as of June 30, 2022, compared to $88.80 million as of December 31, 2021. For the six months ended June 30, net cash used in operating activities increased 169.7% year-over-year to $83.50 million. Net cash used in investing activities grew significantly from the prior-year period to $158.74 million.
For the fiscal first quarter of 2023 (ending March 2023), TELL’s EPS is expected to come in at negative $0.19, down 35.7% year-over-year. Its revenue is estimated to be $133.83 million for the same period, indicating an 8.9% year-over-year decline.
The stock has lost 52.9% over the past six months and 29.5% over the past month to close the last trading session at $2.75.
TELL’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. TELL is also rated an F for Value, Stability, and Quality. In the Energy - Oil & Gas industry, it is ranked #92.
To see additional POWR Ratings for Growth, Sentiment, and Momentum for TELL, click here.
Camber Energy, Inc. (CEI)
CEI is an independent oil and natural gas company that acquires, develops, and sells crude oil, natural gas, and natural gas liquids (NGL) in Missouri, Louisiana, and Texas.
In August, CEI’s majority-owned subsidiary Viking Energy Group, Inc. announced that its majority-owned subsidiary, Viking Protection Systems, LLC, had filed a new patent application in the United States Patent & Trademark Office relating to its electric transmission line protection technology. However, the gains from this pending patent might still take some time to materialize.
In the quarter that ended June 30, CEI’s net income attributable to common stockholders decreased 92.7% from its previous-year quarter to $4.60 million. The income per weighted average number of common shares outstanding came in at $0.01, down 99.2% from the prior-year period. Loss from operations amounted to $0.97 million.
The stock has declined 81.2% year-to-date and 83.8% over the past six months to close its last trading session at $0.16.
It’s no surprise that the stock has an overall rating of D, which translates to a Sell in our proprietary rating system. CEI is also graded a D for Sentiment and Stability. In the Energy - Oil & Gas industry, it is ranked #90.
Click here to see the additional POWR Ratings for CEI (Growth, Value, Momentum, and Quality).
FRO shares were trading at $12.18 per share on Thursday afternoon, down $0.27 (-2.17%). Year-to-date, FRO has gained 74.25%, versus a -22.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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