In this piece, we will take a look at ten best oil and gas stocks to buy.
The global oil and gas industry is witnessing a surge in investments, reflecting its resilience amidst an evolving energy landscape. Despite growing attention toward renewable energy sources, the demand for oil and gas remains robust, driven by the ever-increasing needs of both developed and developing economies. As the world’s appetite for energy intensifies, so does the necessity for sustained capital investment in the oil and gas sector.
According to the Upstream Oil and Gas Investment Outlook, a report by the International Energy Forum and S&P Global Commodity Insights, annual upstream investments must increase by $135 billion to reach $738 billion by 2030 to ensure a stable supply. This figure represents a 15% rise compared to estimates from a year ago and is 41% higher than projections made two years ago. This escalation is attributed to rising production costs and an improved demand outlook. The report indicates that a cumulative $4.3 trillion will be needed for upstream investments between 2025 and 2030, even as demand growth plateaus.
The rise in upstream capital expenditures, which grew by $63 billion year-on-year in 2023 and is expected to increase by another $26 billion in 2024, has placed the annual investment level above $600 billion for the first time in a decade. Notably, North America is expected to be a significant contributor to this growth, accounting for a third of the spending in 2024. However, Latin America is emerging as a vital player in the global supply chain, poised to become the largest source of incremental capital expenditure growth in 2024, surpassing North America for the first time in two decades. The region’s prominence is set to continue through 2030, particularly in conventional crude projects, with substantial expansions planned in Brazil and Guyana. These developments underscore the ongoing importance of the Americas in the global oil and gas supply chain.
The industry’s improved investment landscape is also driven by factors such as resilient production in regions like Russia, Iran, and Venezuela, despite geopolitical challenges. Additionally, non-OPEC supply has exceeded expectations, and spare production capacity has been restored. Nevertheless, the risk of underinvestment and potential supply shortages could resurface if commodity prices, geopolitical dynamics, or environmental regulations shift significantly.
Meanwhile, OPEC remains a crucial player in maintaining market stability. In an address to the International Chamber of Commerce in Vienna, Dr. Hasan M. Qabazard, Director of the Research Division at OPEC, emphasized the organization’s commitment to ensuring energy security and meeting future demand. He highlighted that while energy prices have been volatile, the global economy has shown resilience, and market stability remains a top priority. OPEC’s strategy aims to balance the supply and demand dynamics, ensuring that oil continues to play a vital role in the energy mix for decades to come.
The current environment presents a promising opportunity for investors looking to capitalize on the resurgence of the oil and gas sector, particularly in the penny stock category. While penny stocks are often associated with higher risk due to their low price and smaller market capitalization, they also offer substantial upside potential. Many companies in this category are well-positioned to benefit from the increasing capital inflow into the industry, making them attractive options for investors seeking exposure to the oil and gas markets at a relatively low entry point.
With that, let’s explore the ten best oil and gas penny stocks to buy.
Aerial view of a refinery tower surrounded by the sprawling landscape of pipelines in an oil & gas midstream facility.
Our Methodology
For this article, we used the Finviz screener and identified 20 stocks in the oil and gas sector having Buy or Buy-equivalent ratings from analysts and with share prices under $5, as of September 27. Next, we examined Insider Monkey’s data on 912 hedge funds as of Q2 2024. We narrowed down our list to 10 stocks most widely held by institutional investors and ranked them in ascending order of the number of hedge funds that have stakes in them as of Q2 of 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. Imperial Petroleum Inc. (NASDAQ:IMPP)
Number of Hedge Fund Holders: 6
Share Price: $4
Imperial Petroleum Inc. (NASDAQ:IMPP) provides international seaborne transportation services to oil producers, refineries, and commodities traders. The company’s fleet transports refined petroleum products like gasoline, diesel, and jet fuel, along with edible oils, chemicals, crude oil, iron ore, coal, and grains. Headquartered in Athens, Greece, Imperial Petroleum Inc. (NASDAQ:IMPP) has a diversified fleet that includes medium-range refined petroleum product tankers, Aframax and Suezmax tankers, and handysize drybulk carriers.
The company had a strong financial performance in Q2 2024, reporting a net profit of $19.5 million—its second-best quarterly performance ever. This achievement was driven by the solid utilization of its fleet, especially product tankers operating in the tight West of Suez market. Revenues came in at $47 million, slightly lower compared to the same period last year, due to a decrease in fleet size and lower Suezmax rates. Despite this, Imperial Petroleum Inc. (NASDAQ:IMPP) managed to offset these challenges with a strategic focus on spot activity and favorable tanker rates.
From a balance sheet perspective, the company is in a robust position, with a debt-free balance sheet and a strong cash base of approximately $190 million as of June 2024. This liquidity offers flexibility for fleet expansion and navigating market fluctuations. Imperial Petroleum Inc. (NASDAQ:IMPP) profitability has been on an upward trajectory over the last three quarters, showcasing its ability to generate consistent returns even amid seasonal headwinds.
Hedge fund sentiment around Imperial Petroleum Inc. (NASDAQ:IMPP) has also improved, with six hedge funds holding stakes in the company as of Q2 2024, up from four in the previous quarter. This increased interest reflects confidence in the company’s strategic positioning and financial health.
With a net asset value of around $430 million and a market capitalization significantly lower, Imperial Petroleum Inc. (NASDAQ:IMPP) appears to be trading at a discount. The company’s continued focus on strategic acquisitions, efficient fleet utilization, and maintaining a strong financial structure positions it well for future growth and potential value realization for shareholders.
09. Ring Energy, Inc. (NYSE:REI)
Number of Hedge Fund Holders: 11
Share Price: $1.60
Ring Energy, Inc. (NYSE:REI) is an independent oil and natural gas company headquartered in The Woodlands, Texas. The company specializes in the acquisition, exploration, development, and production of oil and natural gas properties. Ring Energy, Inc. (NYSE:REI) operates across a substantial land base, holding interests in 56,711 net developed acres and 2,668 net undeveloped acres in Texas counties, including Andrews, Gaines, and Ward, along with additional properties in Lea County, New Mexico. This strategic positioning in the prolific Permian Basin enables the company to tap into one of the most productive oil regions in the U.S., responsible for nearly half of the country’s daily production.
In Q2 2024, Ring Energy, Inc. (NYSE:REI) reported impressive financial metrics, with a net income of $22.4 million, translating to $0.11 per diluted share, while adjusted net income was $23.4 million, or $0.12 per diluted share. The company achieved total sales volumes of 19,786 barrels of oil equivalent per day (BOEPD), marking a 4% increase from the previous quarter and exceeding guidance. This growth was primarily fueled by oil production, which averaged 13,623 barrels per day, a 2% rise from Q1, and surpassing expectations.
The company’s operational efficiency is underscored by its generation of $37 million in adjusted free cash flow during the first half of 2024, reflecting a remarkable 60% increase compared to the previous year. This growth can be attributed to the strategic acquisition of Founders, completed in August 2023, which has further strengthened Ring Energy, Inc. (NYSE:REI) market position. Additionally, the company successfully drilled and completed 11 wells in Q2, aligning with its operational targets.
With 11 hedge fund holders as of Q2 2024, up from 9 in the previous quarter, market confidence in Ring Energy, Inc. (NYSE:REI) is evident. The U.S. Energy Information Administration forecasts a nearly 8% increase in crude oil output in the Permian Basin for 2024, aligning with Ring Energy, Inc. (NYSE:REI) focus on high-value formations. As the company continues to enhance production and capitalize on market opportunities, it stands out as a compelling investment within the oil and gas penny stock sector.
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Publish date : 2024-09-28 22:20:00
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