The energy supply crunch has been driving oil prices to multi-year highs. Brent crude rallied to $85.08 per barrel, while the West Texas Intermediate (WTI) reached $82.96 per barrel earlier this week. Brent and WTI have been up around 20% since the beginning of September. Analysts expect energy prices to remain high amid rebounding industrial demand and with winter nearing.
The United States Energy Information Administration (EIA) predicts that households would spend more on energy this winter than last year, which should drive prices further. The industry’s uptrend is evident in the Energy Select Sector SPDR Fund’s (XLE) 17.6% gains over the past month versus the broader SPDR S&P 500 ETF Trust’s (SPY) 2.1% returns.
Given this backdrop, we think energy stocks MOL Hungarian Oil and Gas PLC (MGYOY), TransGlobe Energy Corporation (TGA), and Blueknight Energy Partners, L.P. (BKEP), which are currently trading below $5, could be solid bets now. Our POWR Ratings system has rated these stocks ‘Strong Buy.’
MOL Hungarian Oil and Gas PLC (MGYOY)
MGYOY is an integrated oil and gas company that operates through four segments: upstream; gas midstream; downstream; and consumer services. The company is headquartered in Budapest, Hungary.
On June 8, MGYOY reached an agreement with Austrian oil, gas, and petrochemical giant OMV AG (OMVKY) to purchase its Slovenian unit OMV Slovenija d.o.o. The purchase of a 92.3% stake in the unit is expected to enable MGYOY to expand its network of service stations and enhance its consumer services segment.
For its second fiscal quarter, ended June 30, the company’s net sales revenues climbed 88.6% year-over-year to $4.88 billion. Its EBITDA came in at $922 million, up 140.1% from the same period last year. Its net profit attributable to equity holders of the parent and EPS stood at $630 million and $0.90, respectively, up significantly from their negative year-ago values.
The Street’s $4.89 billion revenue estimate for the current quarter (ending December 2021) indicates a 42.1% year-over-year increase.
The stock has gained 64.2% in price over the past year and 29% over the past six months to close yesterday’s trading session at $4.40.
MGYOY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a Value and Momentum grade of A, and a Stability grade of B. In the 49-stock, A-rated Foreign Oil & Gas industry, it is ranked #7. Click here to see the additional POWR Ratings for MGYOY (Growth, Sentiment, and Quality).
TransGlobe Energy Corporation (TGA)
TGA and its subsidiaries acquire, explore, produce, and develop crude oil and natural gas in Egypt and Canada. The company holds a 100% working interest in four Production Sharing Concessions (PSCs) in West Gharib, North-West Gharib, West Bakr, and South Ghalazat in Egypt. It also owns working interest assets in Cardium and Ellerslie formation in the Harmattan area of Western Canada. The company is headquartered in Calgary, Canada.
On September 29, TGA announced that it had found oil-bearing sands in two of its development wells in the West Bakr formation. The company expects its wells bearing Cardium to be connected to production sequentially in October. The developments may contribute significantly to the company’s revenue stream.
In its second fiscal quarter, ended June 30, TGA’s revenue increased 334.7% year-over-year to $50.63 million. This can be attributed to a 344.1% rise in petroleum and natural gas sales from the prior-year quarter, net of royalties, to $50.60 million. Its net earnings came in at $7.72 million, while net earnings per share stood at $0.11, both up substantially from their negative year-ago values.
A $0.70 consensus EPS estimate for its next year (fiscal 2022) indicates a 363.2% year-over-year increase. Likewise, the $146.62 million consensus revenue estimate for the next year reflects a 0.6% improvement from the current year.
TGA’s stock has gained 470.5% in price over the past year to close yesterday’s trading session at $2.51. It has gained 161.5% year-to-date.
It’s no surprise that TGA has an overall A rating which translates to Strong Buy in our POWR Rating system. The stock has an A grade for Momentum, Sentiment, and Quality and a B grade for Growth and Value. It is ranked #2 in the Foreign Oil & Gas industry.
To see the additional POWR Rating for Stability for TGA, click here.
Note that TGA is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Blueknight Energy Partners, L.P. (BKEP)
BKEP is an integrated terminaling services provider for companies handling liquid asphalt in the United States. The Oklahoma City, Okla.-based company operates as a publicly-traded master limited partnership with Ergon, Inc. affiliate Blueknight Energy Partners G.P., L.L.C. as its general partner.
On July 27, BKEP declared a quarterly cash distribution on the partnership’s common units of $0.04 per unit and the partnership’s preferred units of $0.17875 per unit. The distributions were to be paid on August 13.
BKEP’s total revenue increased 7.7% year-over-year to $27.76 million in its second fiscal quarter, ended June 30. Its operating income rose 31.3% from the prior-year quarter to $8.70 million, while net income improved 439.1% from the same period last year to $7.28 million. Its net income per common unit stood at $0.02, representing a substantial increase from its negative year-ago value.
The Street’s $131 million revenue estimate for the current year (fiscal 2021) reflects an 18.8% year-over-year increase.
The stock has gained 149.6% in price over the past year and 69.4% year-to-date to close yesterday’s trading session at $3.37.
BKEP’s POWR Ratings reflect this promising outlook. The stock has an overall A rating which equates to Strong Buy in our proprietary rating system. The stock has a Quality grade of A, and a Value grade of B. It is ranked #4 of the 11 stocks in the A-rated MLPs – Other industry.
In addition to the POWR Rating grades we’ve stated above, one can see BKEP ratings for Growth, Momentum, Stability, and Sentiment here.
MGYOY shares were trading at $4.40 per share on Wednesday afternoon, up $0.15 (+3.53%). Year-to-date, MGYOY has gained 26.80%, versus a 22.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.3 Energy Stocks Under $5 Rated ‘Strong Buy’ in the POWR Ratings appeared first on StockNews.com