Oil prices have been fluctuating since Russia’s invasion of Ukraine a month ago because Russia is one of the world’s largest oil exporters. Many Western countries, including the United States, announced a complete ban on Russian oil imports on March 8, causing oil prices to rise. The European Union has been considering imposing an oil import embargo on Russia, which might cause oil prices to climb further in the near term.
However, OPEC and the U.S. have been in talks to boost global oil production in the wake of the sanctions on Russia. Earlier today, the White House announced its plans to release a record one million barrels of oil per day from the nation’s Strategic Petroleum Reserve over the next six months. Following this news release, Brent crude futures fell by nearly 5%. Nevertheless, because the market remains volatile with multiple attacks on Saudi oil reserves over the past month and a potential German ban on Russian oil, energy prices are expected to fluctuate wildly in the near term.
As global oil demand picks up pace in tandem with the economic recovery, we think undervalued energy stocks PBF Energy Inc. (PBF), Baytex Energy Corp. (BTEGF), and Oceaneering International, Inc. (OII) could be ideal investment bets now.
PBF Energy Inc. (PBF)
PBF in Parsippany, N.J. is a petroleum refiner and supplier of gasoline, diesel fuel, jet fuel, unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants, and other petroleum products. The company operates through two segments: Refining; and Logistics. As of Dec. 31, 2021, the company owned and operated six oil refineries and related assets.
During the fourth quarter, ended Dec. 31, 2021, PBF’s revenues increased 125.5% year-over-year to $8.24 billion. Its income from operations rose 188.7% from its year-ago value to $291.10 million. The company’s net income increased 166.1% year-over-year to $189.10 million, while its EPS grew 154.6% from the prior-year quarter to $1.36.
PBF is relatively undervalued compared to its peers. In terms of forward non-GAAP P/E, PBF is currently trading at 8.96x, which is 14.4% lower than the 10.46x industry average. Its 0.09 forward Price/Sales multiple is 94.6% lower than the 1.60x industry average.
Analysts expect PBF’s revenues to increase 61.9% year-over-year to $7.97 billion in its fiscal first quarter (ending March 31, 2022). Its EPS is expected to increase 108.8% to $0.23 in the current quarter.
Shares of PBF have gained 86.4% in price year-to-date, closing yesterday’s trading session at $24.17.
PBF’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
PBF has a B grade for Momentum and Value. Within the A-rated Energy - Oil & Gas industry, it is ranked #31 of 88 stocks.
To see additional POWR Ratings for Growth, Sentiment, Stability, and Quality for PBF, click here.
Baytex Energy Corp. (BTEGF)
BTEGF is a Calgary, Canada-based oil and gas company that acquires, develops, and produces crude oil and natural gas in the Western Canadian Sedimentary Basin and the Eagle Ford in the United States. Its offerings include light oil and condensate, heavy oil, natural gas liquids, and natural gas.
As of Dec. 31, 2021, BTEGF reduced its net debt by 24% to $1.4 billion. Also, the company generated record free cash flow of $421 million for its fiscal 2021. The company is expected to generate $550 million in free cash flow by the second quarter of the current year. In addition, BTEGF reduced its GHG emissions intensity by 11% year-over-year in 2021 and a 52% reduction compared to its 2018 baseline.
During its fiscal 2021 fourth quarter (ended Dec. 31, 2021), BTEGF’s petroleum and natural gas sales increased 136.4% year-over-year to CAD552.40 million ($441.67 million). Its net income grew 154.7% from the same period last year to CAD563.24 million ($450.33 million), while its EPS came in at CAD0.98, representing a 151.3% increase year-over-year.
BTEGF is trading at a discount to its peers. The stock’s 6.35 forward non-GAAP P/E multiple is 39.3% lower than the 10.46 industry average. In addition, BTEGF’s forward Price/ Cash Flow and EV/EBITDA ratios of 2.70 and 4.04, respectively, are significantly lower than the 5.38 and 7.09 industry averages.
Analysts expect BTEGF’s EPS and revenue to increase 11.3% and 3.3%, respectively, year-over-year to $0.79 and $1.64 billion in its fiscal 2023.
BTEGF has gained 331% in price over the past year.
BTEGF’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. It is no surprise that BTEGF has an A grade for Momentum and a B grade for Growth, Value, and Quality. In the Energy - Oil & Gas industry, it is ranked #1 of 88 stocks.
In total, we rate BTEGF on eight distinct levels. Beyond what we have stated above, we have also given BTEGF grades for Sentiment and Stability.
Oceaneering International, Inc. (OII)
OII in Houston, Tex., specializes in providing engineered services and products to the offshore oil and gas industry globally. It operates through five segments: Subsea Robotics; Manufactured Products; Offshore Projects Group; Integrity Management & Digital Solutions; and Aerospace and Defense Technologies.
On March 28, OII announced the launch of three new mobile robots: UniMover D 100; UniMover O 600; and MaxMover CB D 2000, revamping its Autonomous Mobile Robotics portfolio. The introduction should expand the company’s operations significantly.
On the same day, OII announced that it partnered with BlueBotics navigation technology on its line of industrial autonomous mobile robots. Analysts expect this strategic collaboration to maximize the potential of mobile robotics and its adoption in all industries.
OII’s revenue increased 10% year-over-year to $466.71 million in the fourth quarter, ended Dec. 31, 2021. The company’s gross margin increased 76% from its year-ago value to $79.16 million, while its adjusted net income grew 179% year-over-year to $5.02 million. OII’s adjusted EPS rose 150% from the prior-year quarter to $0.05.
OII is relatively undervalued compared to its peers. The stock’s 0.75 forward Price/Sales multiple is 53.2% lower than the 1.60 industry average. In addition, its 0.91 forward EV/Sales ratio is 60.8% lower than the 2.32 industry average.
The $0.14 consensus EPS estimate for its fiscal second quarter (ending June 30, 2022) represents a 41.6% improvement year-over-year. The $518.81 million consensus revenue estimate for the next quarter indicates a 4.1% increase from the same period last year.
Shares of OII have risen 39.4% in price over the past year to close the last trading session at $15.42.
OII’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. It also has an A grade for Momentum and a B grade for Value and Quality. Also, it is ranked #5 of 42 stocks in the Energy – Services industry.
In addition to the POWR Ratings grades I have just highlighted, one can see the OII ratings for Growth, Sentiment, and Stability here.
PBF shares were trading at $24.65 per share on Thursday afternoon, up $0.48 (+1.99%). Year-to-date, PBF has gained 90.05%, versus a -3.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 Energy Stocks That Still Look Cheap: PBF Energy, Baytex, and Oceaneering International StockNews.com
