In this article, we discuss 10 cheap oil stocks to buy today. If you want to skip our detailed analysis of these stocks, go directly to 5 Cheap Oil Stocks to Buy Today.
With WTI crude oil prices topping $120 per barrel as recently as mid-June, concerns over rising interest rates and a potential U.S. recession brought crude prices below $100 in mid-July. A number of investors are concerned that the oil industry could be in for a repeat of the 2008 and 2009 scenarios, where oil prices soared to all-time highs only to collapse when the U.S. economy took a hit. Although the global market and political environment has contributed to the rise in inflation, they also brought oil stocks back into the limelight on Wall Street. Despite the global push toward renewable energy, oil and natural gas investments are on the rise since the global transition to green energy will need the help of fossil fuels to meet soaring energy demand. According to the Short-Term Energy Outlook (STEO) presented by the U.S. Energy Information Administration (EIA), OPEC crude oil production is expected to rise by 2.4 million b/d to an average of 28.7 million b/d in 2022, and will further increase to 29.3 million b/d in 2023. Additionally, U.S. crude oil production is forecast to average around 12.8 million b/d in 2023, which would set a record for most U.S. crude oil production in a year.
Russia's invasion of Ukraine has sent oil, natural gas, coal and other commodity prices soaring, creating an earnings tail wind for many energy sector stocks. Since Russia is a leading oil-producing country, sanctions placed by the United States and Europe would have a huge impact on global oil prices. According to the World Bank, energy prices are expected to rise by 50% in 2022. In a global situation where inflation and geopolitical tensions have played their part in destabilizing the post-pandemic recovery, it seems like investors have found a beacon of hope as they stand to gain much from oil and gas companies’ increasing earnings.
For those who cannot afford some of the pricier oil stocks on the market, there are several cheaper alternatives that offer the same growth potential but at lower prices. Some of the cheap oil stocks to buy include BP p.l.c. (NYSE:BP), Kinder Morgan, Inc. (NYSE:KMI), and Halliburton Company (NYSE:HAL), among others listed below.
For this list, we have selected companies that operate in the oil sector and are trading at relatively cheap prices compared to peers. The business fundamentals and analyst ratings for these firms are also discussed to provide readers with some additional context for their investment choices. All the stocks listed below are priced under $30 per share as of July 28.
The hedge fund sentiment around each stock was derived from Insider Monkey’s database which tracks more than 900 hedge funds as of Q1 2022.
10 Cheap Oil Stocks to Buy Today
10. Vermilion Energy Inc. (NYSE:VET)
Number Of Hedge Fund Holders: 18
Share Price as of July 28: $24.97
Vermilion Energy Inc. (NYSE:VET) is an international oil and gas producer based in Calgary, Canada, that provides production programs focusing on acquisition, exploration, development and optimization in North America, Europe and Australia.
Earlier this June, Scotiabank analyst Jason Bouvier upgraded Vermilion Energy Inc. (NYSE:VET) to Outperform from Sector Perform with a C$36 price target, citing its exposure to European gas prices and improving relative valuation. According to Bouvier, WTI prices have fallen from their recent high and Vermilion's share price has fallen roughly in line with its peer group over the past couple of weeks, but this means that the relative valuation "has improved materially" given that European gas prices have risen by about 50% during this same time frame and Vermilion Energy Inc. (NYSE:VET) derives about 40%-45% of its cash flow from European gas prices.
At the end of the first quarter of 2022, 18 hedge funds in the database of Insider Monkey held stakes worth $152.7 million in Vermilion Energy Inc. (NYSE:VET), compared to 14 in the previous quarter worth $98 million. Among the hedge funds being tracked by Insider Monkey, John Overdeck and David Siegel's Two Sigma Advisors is a leading shareholder in Vermilion Energy Inc. (NYSE:VET), with 1.52 million shares worth more than $32 million.
Similar to BP p.l.c. (NYSE:BP), Kinder Morgan, Inc. (NYSE:KMI), and Halliburton Company (NYSE:HAL), Vermilion Energy Inc. (NYSE:VET) is a cheap option that investors can look into to take advantage as energy prices rise to new highs.
9. Enterprise Products Partners L.P. (NYSE:EPD)
Number Of Hedge Fund Holders: 19
Share Price as of July 28: $26.41
Enterprise Products Partners L.P. (NYSE:EPD) is an American midstream natural gas and crude oil pipeline company with headquarters in Houston, Texas. It operates as a provider of midstream energy services to producers and consumers of natural gas, crude oil, refined products and petrochemicals.
In Q1 2022, Enterprise Products Partners L.P. (NYSE:EPD) reported $1.8 billion in distributable cash flow, up from $1.7 billion year-over-year. Its cash flow from operations stood at $2 billion, compared with $1.9 billion in the first quarter of 2021.
Truist analyst Neal Dingmann raised the price target on Enterprise Products Partners L.P. (NYSE:EPD) to $30 from $27 and kept a Buy rating on the shares earlier this May. The analyst cited the company's "outsized" Q1 earnings beat and its new growth project set announced at analyst day. Dingmann added that he is "constructive" on Enterprise Products units on the forward opportunity tied to the leverage of an enhanced Permian system in the current environment.
As of the quarter ended in March, 19 hedge funds in Insider Monkey’s database owned stakes in Enterprise Products Partners L.P. (NYSE:EPD), down from 21 in the previous quarter. The consolidated value of these stakes is over $177.5 million. With stakes worth $84.5 million, First Eagle Investment Management was the company’s leading shareholder in Q1.
“While reducing in health care and consumer staples, we increased our exposure to high-quality names in economically sensitive areas of the market. We added to low-cost, high-quality energy names (including) Enterprise Products Partners LP. We are positive on this company’s strong balance sheets, competitive positions and exposure to an economic recovery.”
8. Magnolia Oil & Gas Corporation (NASDAQ:MGY)
Number Of Hedge Fund Holders: 22
Share Price as of July 28: $23.35
Magnolia Oil & Gas Corporation (NASDAQ:MGY) is an oil and natural gas company that is engaged in the acquisition, development, exploration, and production of oil, natural gas, and natural gas liquid (NGL) reserves. Its oil and natural gas properties are located primarily in Karnes County and the Giddings area in South Texas, where it targets the Eagle Ford Shale and Austin Chalk formations.
On July 20, MKM Partners analyst Leo Mariani assumed coverage of Magnolia Oil & Gas Corporation (NASDAQ:MGY) with a Buy rating and $26 price target as part of a broader research note on Exploration & Production names. While the oil market has been quite tenuous of late, WTI oil prices should stay above $100 as long as the war in Ukraine is ongoing, the analyst tells investors in a research note. The analyst is also positive on the company's "high per share production growth, upside potential in the Austin Chalk play, best in class balance sheet and strong, consistent returns of capital to shareholders."
The number of hedge funds tracked by Insider Monkey owning stakes in Magnolia Oil & Gas Corporation (NASDAQ:MGY) grew to 22 in Q1 2022, from 20 in the previous quarter. The collective value of these stakes is roughly $276.26 million, as compared with $184 million worth of stakes held by hedge funds in Q4 2021. Amy Minella's Cardinal Capital is the company's leading shareholder, with a stake worth $93.3 million.
Here is what Wasatch Ultra Growth Fund has to say about Magnolia Oil & Gas Corporation (NASDAQ:MGY) in its Q1 2022 investor letter:
“Another strong stock in the Fund was Magnolia Oil & Gas Corp. (NASDAQ:MGY). Operating primarily in oil-rich South Texas, the company engages in the development, exploration and production of oil and natural gas. Sharply higher prices for oil and gas boosted Magnolia’s share price during the first quarter. We’re impressed by the company’s disciplined management team and consistent record of returning cash to shareholders regardless of the price of oil.”
7. Enerplus Corporation (NYSE:ERF)
Number Of Hedge Fund Holders: 22
Share Price as of July 28: $13.72
Enerplus Corporation (NYSE:ERF) is one of Canada’s largest independent oil and gas producers. The company holds oil and natural gas property interest in the United States and in western Canada.
This past June, Scotiabank analyst Jason Bouvier upgraded Enerplus Corporation (NYSE:ERF) to Outperform from Sector Perform with a price target of C$25, up from C$20. The analyst increased his average target price in his Canadian Energy coverage by 17% as the industry continues to see significant tailwinds in commodity prices, though Bouvier added "not everything is rosy." He believes that the robust commodity price environment, continued capital discipline, and strengthening balance sheets outweigh the headwinds the industry is facing.
At the end of the first quarter of 2022, 22 hedge funds in the database of Insider Monkey held stakes worth $300.34 million in Enerplus Corporation (NYSE:ERF), up from 19 in the previous quarter worth $259.86 million. Among the hedge funds being tracked by Insider Monkey, Boston-based firm Adage Capital Management is a leading shareholder in Enerplus Corporation (NYSE:ERF), with 9.14 million shares worth more than $116.14 million.
6. Comstock Resources, Inc. (NYSE:CRK)
Number Of Hedge Fund Holders: 25
Share Price as of July 28: $15.85
Comstock Resources, Inc. (NYSE:CRK) is an independent energy company that engages in the acquisition, exploration, development, and production of oil and natural gas primarily in North Louisiana and East Texas.
On July 21, Citi analyst Paul Diamond initiated coverage of Comstock Resources, Inc. (NYSE:CRK) with a Buy rating and $17 price target. The company's production growth and "lateral improvements" present opportunities for relative operational outperformance, Diamond tells investors in a research note.
On May 3, the firm posted earnings for the first quarter of 2022, reporting earnings per share of $0.51, in line with market expectations. The revenue over the period was $524 million, beating estimates by $68 million.
At the end of the first quarter of 2022, 25 hedge funds in the database of Insider Monkey held stakes worth $116 million in Comstock Resources, Inc. (NYSE:CRK), up from 19 in the preceding quarter worth $92 million. Among the hedge funds being tracked by Insider Monkey, New York-based firm DE Shaw is a leading shareholder in Comstock Resources, Inc. (NYSE:CRK), with 4 million shares worth more than $52 million.
Much like BP p.l.c. (NYSE:BP), Kinder Morgan, Inc. (NYSE:KMI), and Halliburton Company (NYSE:HAL), Comstock Resources, Inc. (NYSE:CRK) is one of the oil stocks that hedge funds are buying.
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Disclosure. None. 10 Cheap Oil Stocks to Buy Today is originally published on Insider Monkey.