Oil costs have recovered from three yr lows, with Brent crude oil costs hovering close to $77 per barrel, however costs stays nicely beneath the $115 per barrel excessive final seen in 2011. The falling worth has pushed some oil shares beneath $1 per share, making them penny shares.
However, costs have been helped in latest months by commitments from the Organization of Petroleum Exporting Countries (OPEC) to increase manufacturing cuts by way of 2019 and a dwindling of the world oil oversupply. Recently, the International Energy Agency (IEA) stated that the oversupply ought to finish. But continued geopolitical unrest may negatively affect costs. Meanwhile, the U.S. has not dedicated to the identical manufacturing cuts as different nations, which may restrict the affect of OPEC’s cuts. As of August 2018, the EIA predicts Brent crude oil costs will common round $72 per barrel this yr and between $70 and $71 in 2019, whereas West Texas Intermediate (WTI) oil costs will common round $66 per barrel this yr and $64 per barrel in 2019.
The proven fact that these low-priced vitality shares have survived the oil hunch could converse to their resilience. They have been chosen based mostly on their longevity and potential to revenue from larger oil costs going ahead, in addition to the EIA’s prediction for larger pure gasoline costs over the following two years. However, buyers ought to be cautious in coping with so-called “penny stocks.” All figures are present as of August 31, 2018.
1. Petro River Oil Corp. (PTRC)
The inventory worth for Petro River Oil noticed a dramatic drop beginning in 2013, and now stands at $1.38 per share. The firm develops oil internationally, with a presence in Oklahoma, California, Ireland, England and Denmark. Petro River Oil makes use of 3D seismic evaluation to search out oil assets. The firm has proven elevated money reserves previously a number of quarters, so it might be able to accumulate belongings to make the most of larger oil costs. (For extra, see: 5 Biggest Risks Faced by Oil and Gas Companies.)
- Average Volume: 17,144
- Market Cap: $24.25 million
- P/E Ratio (TTM): N/A
- EPS (TTM): -$1.24
2. Bellatrix Exploration (BXE)
The Canadian oil and gasoline firm is focussed on the Western Canada Sedimentary Basin. As oil costs have slid, Bellatrix inventory has slid 63% over the past yr, falling from $2.59 per share in August 2017 to its present worth of $zero.96 per share. The firm is anticipated to publish a per-share loss within the close to time period. However, the inventory – and the corporate – might be primed for a comeback. Bellatrix is anticipated to develop earnings by almost 70 p.c over the following few years, with larger money flows anticipated and larger valuations for the inventory worth. The common 12-month worth goal for the inventory is $1.85 per share, which represents a 93 p.c acquire from present ranges. Nonetheless, analysts are a bit tepid on the inventory, presently score it a “hold.” This is one for buyers to regulate.
3. Granite Oil Corp. (GXOCF)
Granite focuses on the Western Canada Sedimentary Basin. The firm declared a dividend of $zero.023 per share in July 2018 and once more in August 2018. Management has decreased prices considerably to make up for declining oil costs, and debt is comparatively low. The proven fact that the corporate has not eradicated its dividend bodes nicely, and it presently provides a dividend yield of 13.29%. Granite’s inventory worth has fallen almost 49% over the past yr to round $1.53 per share. This is one to look at to see if it turns round.
- Average Volume: 20,310
- Market Cap: $54.38 million
- P/E Ratio (TTM): N/A
- EPS (TTM): -$zero.25
The Bottom Line
There is a saying amongst buyers that “a rising tide lifts all boats.” But the rising tide of oil costs will not elevate a leaky boat. Penny oil shares on this checklist have seen higher days. They usually are not startups; they’re has-beens. In different phrases, these performs are for those that see important odds that the businesses can flip round. To make sure, the drop in oil costs was not the fault of any of those corporations, however that does not change the truth that they must make some fast strikes to reverse their monetary fortunes. (For extra studying, take a look at: A Guide to Investing in Oil Markets.)