Oil prices rose for the fifth straight week, hitting seven-year highs on January 19 amid increasing geopolitical risks and a global supply crunch. This trend will likely continue as the cold snap and frequent winter storms drive energy demand. In addition, the current tension between the United States and Russia over Ukraine and worsening Middle East troubles could send oil prices higher. Against this backdrop, Barclays has raised its median oil price forecast by $5 to $85 for 2022.
According to the FactSet data, the energy sector grew more than 50% in 2021 on the resumption of travel. The bullish investor sentiment surrounding the industry is evidenced by the Energy Select Sector SPDR ETF’s (XLE) 49.75% returns over the past year.
Given these factors, we think these are three top Energy Stocks that are well-positioned to capitalize on the growing demand: REX American Resources Corporation (REX), SilverBow Resources, Inc. (SBOW), and VAALCO Energy, Inc. (EGY). These stocks are rated ‘Strong Buy’ in our proprietary POWR Ratings system.
REX American Resources Corporation (REX)
Dayton, Ohio-based REX produces ethanol and refined coal together with its subsidiaries in the U.S. It is one of the largest ethanol producers in the country, operating in two segments–Ethanol and By-Products; and Refined Coal. The company also offers distillers grains and non-food grade corn oil. REX has ownership interests in six ethanol production facilities in the U.S.
In its fiscal 2021 third quarter, ended October 31, WH’s net sales increased 63.5% from the same period last year to $203.07 million. The company’s gross profit rose 32.9% year-over-year to $25.15 million. Its net income attributable to REX common shareholders increased 72.8% from its year-ago value to $15.28 million. The company’s net income per share attributable to REX common shareholders increased 77.8% from its year-ago value to $2.56.
The $202 million consensus revenue estimate for its fiscal fourth quarter, ending Jan. 31, 2022, represents a 60.3% growth year-over-year. The $3.45 consensus EPS estimate for the current quarter indicates 484.7% growth year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 11.6% in price to close Friday’s trading session at $96.75.
REX’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
REX has an A grade for Sentiment and a B for Growth and Quality. Within the Energy - Services industry, it is ranked #1 of 41 stocks. To see additional POWR Ratings (Value, Stability, and Momentum) for REX, click here.
SilverBow Resources, Inc. (SBOW)
SBOW in Houston, Tex., is an independent oil and gas company with assets in the Eagle Ford Shale location in South Texas. The company has more than 30 years of technical expertise within the basin and drives shareholder value by maximizing capital investments, reducing operational costs, and delivering high return inventory.
On Nov. 22, 2021, SBOW acquired the oil and gas assets in Eagle Ford for $75 million. This acquisition represents the largest ever transaction for SBOW as of November 2021. The acquisition is expected to boost its production by double digits.
On Nov.15, 2021, SBOW amended its borrowing base and Lien Notes Agreement. It increased its borrowing base to $460 million from $300 million and has extended the maturity date of the Second Lien Notes Purchase Agreement from December 2024 to December 2026. Regarding this, SBOW CEO Sean Woolverton said, “The 50% increase to our borrowing base reflects the value SilverBow has added through drillbit, our previously announced acquisitions, and improved commodity prices. Our liquidity is now at the highest level it has been since early 2018.”
In its fiscal 2021 third quarter, ended September 30, SBOW’s net revenue increased 117.2% from the same period last year to $99.25 million. SBOW’s operating income rose 359.6% from the same period last year to $59.65 million. And the company’s adjusted EBITDA rose 60.1% from the same period last year to $53.63 million.
Analysts expect SBOW’s revenue for the quarter ended December 31, 2021, to come in at $108 million, representing 102% year-over-year growth. The company’s EPS is expected to be t $2.93 for the to-be-reported quarter, indicating a 125.4% rise from the same period last year.
SBOW has gained 255.9% in price over the past year and closed Friday’s trading session at $20.32.
SBOW has an overall A rating, which translates to Strong Buy in our proprietary rating system. It has an A grade for Growth and Momentum, and a B grade for Value, Sentiment, and Quality. It is ranked #2 of 77 stocks in the B-rated Energy - Oil & Gas industry. Click here to see SBOW ratings for Stability.
Note that SBOW is one of the few stocks handpicked by our Chief Value Strategist, Steve Reitmeister, currently in the POWR Value portfolio. Learn more here.
VAALCO Energy, Inc. (EGY)
EGY is an independent energy company that acquires, develops, and produces crude oil and natural gas. The Houston, Tex.-based company’s properties are located offshore in the Republic of Gabon and Equatorial Guinea in West Africa.
Last December, EGY commenced its 2021/2022 drilling campaign by drilling its first well at Etame 8H-ST. The campaign is expected to be completed this month. This project might enhance EGY’s production by 7,000-8,000 oil barrels per day.
Last November, EGY completed two well workovers at the Etame field offshore Gabon. These workovers are expected to enhance operational efficiency and maximize production. The revamped wells are expected to produce an additional 1,050 gross crude oil barrels per day.
In its fiscal year 2021 third quarter, ended Sept. 30, 2021, EGY’s total crude oil and natural gas sales increased 206.2% year-over-year to $55.90 million. EGY’s adjusted net income rose 324.6% from the prior-year quarter to $9.95 million. In addition, the company’s adjusted net income per share increased 325.0% from its year-ago value to $0.17.
EGY’s revenues are expected to improve 62.7% year-over-year to $64.70 million for the current quarter, ending March 31, 2022. Analysts expect EGY’s EPS for its fiscal first quarter of 2022 to come in at $0.43, representing a 152.9% rise year-over-year.
Over the past year, the stock has gained 69.4% in price to close Friday’s trading session at $3.88.
EGY’s strong fundamentals are reflected in its POWR Ratings. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. EGY has an A grade for Momentum and Sentiment. The company has a B grade for Quality, Growth, and Value. Among the 77 stocks in the B-rated Energy - Oil & Gas industry, EGY is ranked #1. Click here to see the additional POWR Ratings for Stability for EGY.
REX shares were trading at $97.16 per share on Monday afternoon, up $0.41 (+0.42%). Year-to-date, REX has gained 1.21%, versus a -9.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
Here are 3 Best Stocks to Take Advantage of the Booming Energy Sector, According to POWR Ratings StockNews.com
