In this piece, we will take a look at the ten best oil stocks under $20. If you want to skip our analysis of the oil industry, recent trends, and the bottom five stocks in this list, then head on over to 5 Best Oil Stocks Under $20.
While it had started to take flak for being one of the biggest sources of greenhouse gasses and by extension global warming over the past decade, the oil industry roared back to life last year in the aftermath of the Russian invasion of Ukraine. This was due to the fact that Western sanctions against Russia – one of the biggest suppliers of oil in the world – and the fact that European countries tried to diversify their dependence away from Russian crude, upended the global oil supply chain and led to crude oil prices jumping to record highs.
So how high did crude oil prices go as Russian forces crossed the Ukraine border? Well, while right now crude is trading at roughly $78 per barrel, last year, the prices had soared to a whopping $119 per barrel by March. These prices ushered in the beast of high inflation, with Europe particularly hit the hardest. The integrality of oil to the global economy was laid bare for everyone to see since Europe’s economic powerhouse Germany struggled to keep its factories open and Britain had to resort to using coal to generate electricity as gas supplies dwindled. If you’re interested to find out how inflation rose last year, and which countries were the worst affected, then take a look at 15 Countries with the Highest Inflation Rates.
Since the bulk of global energy production, industrial, and transportation systems use oil or gas as their primary fuels, the sector is also one of the most valuable in the world. According to research, the crude oil industry was worth a whopping $1.2 trillion in 2021, and it is expected to grow at a compounded annual growth rate (CAGR) of 1.8% until 2029 to be worth $1.6 trillion. Regionally, Asia Pacific is naturally expected to outpace global oil growth due to its relatively faster economic growth when compared to the European and North American nations. And, as more evidence of the unbreakable link between oil and economic output, consider the fact that the top three largest economies in the world are also the three top oil consumers in the world.
Moving forward from the past to the present, while the price growth in the oil sector might have slowed down, the industry is now playing hide and seek with China. China is the second largest economy in nominal terms, and the world’s factory – so its economic growth is tied to the demand for crude oil. Therefore, as murmurs of Chinese economic growth rise, oil prices also rise and vice versa is also true. Prices are also tied to U.S. dollar since crude oil is sold only in the American currency. As the dollar becomes stronger, other currencies become weaker in value and therefore countries apart from America have to pay more for their energy needs.
These days, oil prices are also edging higher due to the fact that conflict in the key oil producing countries of Libya and Nigeria has injected fresh uncertainty into the market. In Libya, two of the country’s largest oil fields were shut down in July due to political unrest and Nigeria lost its status as the largest oil producer in Africa in June due to a myriad of reasons such as strikes, repairs, and disruptions.
As to a current snapshot of the industry, global oil demand is expected to touch a record high by the end of this year according to estimates from the International Energy Agency (IEA). The IEA believes that oil demand will sit at 102.1 million barrels per day this year, but it has also revised its growth estimates downwards due to lingering macroeconomic uncertainty as it now expects that oil demand will grow by 220 thousand barrels per day. Naturally, China is expected to account for the strongest share of this growth, accounting for 70% of the overall rise. On the topic of Russia, the country felt the sharpest heat from Western sanctions in June, since its oil exports fell to a two year low of 7.3 million barrels per day. These slashed its export revenues by nearly 50% to last year’s levels, with the earnings sitting at $11.5 billion.
Finally, here’s what might be in store for the oil industry as we head into second quarter earnings season, as management of CTotalEnergies SE (NYSE:TTE), shared during the firm’s first quarter of 2023 earnings call:
Production for Q2 2023 is expected at around $2.5 million equivalent per day. Exploration and Production reported adjusted net operating income of $2.7 billion down 22% quarter-over-quarter, excluding Novatek due to lower oil and gas prices. In the Downstream now, Refining & Chemicals contributed $1.6 billion of adjusted net operating income, up 9% quarter-to-quarter and 44% year-on-year despite the pension protests that were ongoing in France at the end of the quarter, thanks to the strong refining margins.
Refined utilization rate was at 78%. For Q2 2023, we expect the refining utilization rate to increase above 80%, given the end of strikes in France. Marketing and Services results are stabilizing at a level of around $300 million of adjusted net operating income, $280 million for the first quarter of 2023, up 3% year-on-year despite sales being 6% lower. This demonstrates that our strategy of value over volume is working. Overall, at company level, pre working cap was $9.6 billion in the first quarter, plus 5% quarter-on-quarter despite the lower price environment I already commented as the fourth quarter 2022 was impacted by exceptional taxes, notably the $1.1 billion European severity contribution mainly impacting LNG and E&P to a lesser extent.
With these details in mind, let’s take a look at some great oil stocks under $20, out of which some top picks are Southwestern Energy Company (NYSE:SWN), Transocean Ltd. (NYSE:RIG), Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR).
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Our Methodology
To compile our list of the best oil stocks under $20, we first made a list of the forty largest oil companies whose shares trade under $20 in terms of their market capitalization. Then, those with the highest number of hedge fund investors in 2023’s March quarter courtesy of Insider Monkey’s database of 943 hedge funds were selected as the top ten oil stocks under $20.
10 Best Oil Stocks Under $20
10. Liberty Energy Inc. (NYSE:LBRT)
Number of Hedge Fund Investors in Q1 2023: 30
Liberty Energy Inc. (NYSE:LBRT) provides fracturing and other services to oil and gas production companies. The firm’s first quarter of 2023 earnings saw it grow revenue by a strong 59% annually.
After digging through 943 hedge funds to see the stocks that they had invested in during 2023’s March quarter, Insider Monkey found out that 30 had invested in the firm. Liberty Energy Inc. (NYSE:LBRT)’s largest shareholder is Israel Englander’s Millennium Management through a $58 million stake.
Along with Transocean Ltd. (NYSE:RIG), Southwestern Energy Company (NYSE:SWN), Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR), Liberty Energy Inc. (NYSE:LBRT) is a top oil stock under $20.
9. NexTier Oilfield Solutions Inc. (NYSE:NEX)
Number of Hedge Fund Investors in Q1 2023: 31
NexTier Oilfield Solutions Inc. (NYSE:NEX) is an oil and gas products and services provider that enables companies to manage their wells. The growing steam in oil and production after last year’s disruption has led to positive sentiment about the company’s stock. Its shares are rated as Buy on average and have a $2.5 upside.
31 of the 943 hedge funds part of Insider Monkey’s research for this year’s first quarter had bought and owned NexTier Oilfield Solutions Inc. (NYSE:NEX)’s shares. Out of these, the firm’s largest shareholder is Stephen Feinberg’s Cerberus Capital Management courtesy of a $217 million investment.
8. NOV Inc. (NYSE:NOV)
Number of Hedge Fund Investors in Q1 2023: 34
NOV Inc. (NYSE:NOV) sells a wide variety of products to oil companies. These include blenders, pumps, and injectors. Its shares have a nice $6 upside, but the sentiment has shifted mostly to Hold in July.
Insider Monkey took a look at 943 hedge fund portfolios for their Q1 2023 investments and found out that 34 had invested in the firm. Jean-Marie Eveillard’s First Eagle Investment Management is NOV Inc. (NYSE:NOV)’s largest investor in our database through its $688 million stake.
7. Kinder Morgan, Inc. (NYSE:KMI)
Number of Hedge Fund Investors in Q1 2023: 35
Kinder Morgan, Inc. (NYSE:KMI) is a midstream crude oil company with thousands of miles of pipelines in its network. Analyst sentiment around the stock lingers toward Hold but remains a Buy. The firm is busy expanding its infrastructure, as it announced in May that it will increase gas storage capacity by six billion cubic feet.
After sifting through 943 hedge funds for their investments during this year’s March quarter, Insider Monkey discovered that 35 had held Kinder Morgan, Inc. (NYSE:KMI)’s shares. Among these, the largest hedge fund investor is William B. Gray’s Orbis Investment Management, owning 26 million shares that are worth $460 million.
6. Energy Transfer LP (NYSE:ET)
Number of Hedge Fund Investors in Q1 2023: 35
Energy Transfer LP (NYSE:ET) is another midstream company that deals in both crude oil and natural gas. It had some good news for investors earlier this year, as it boosted its operating income outlook for 2023 by hundreds of millions of dollars due to an acquisition.
By the end of March 2023, 35 of the 943 hedge funds part of Insider Monkey’s database had bought a stake in the company. David Abrams’ Abrams Capital Management is Energy Transfer LP (NYSE:ET)’s largest hedge fund shareholder through a $222 million stake.
Southwestern Energy Company (NYSE:SWN), Energy Transfer LP (NYSE:ET), Transocean Ltd. (NYSE:RIG), Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) are some oil stocks under $20 on the hedge fund radar.
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Disclosure: None. 10 Best Oil Stocks Under $20 is originally published on Insider Monkey.