In this piece, we will take a look at the 14 best American energy stocks to buy according to analysts.
Energy, primarily oil, drives the economy. This makes it one of the most important sectors for global and American economic prosperity. This importance has changed the US economic landscape quite a bit over the past couple of years. According to the Energy Information Administration (EIA), 2020 was a historic year for the US energy industry as it was the first time since 1949 that America became a net petroleum exporter. In 2020, the US imported 7.86 million barrels of oil per day, which was 640,000 barrels lower than its 8.50 million barrels per day of exports. Since then, US energy exports have continued to grow, and the oil surplus jumped to a record of 1.26 million barrels per day in 2022.
At the heart of this historic shift is the American energy industry which produced a historic 20.08 million barrels per day in 2022. This was nearly enough to theoretically meet America’s oil consumption of 20.28 million barrels, but despite this, the US continued to import oil. On the surface, this sounds counterintuitive since a net energy exporter should be sufficient to meet all of its requirements through its own production. However, as America has historically depended on sour oil imports from the Middle East, US shale, which is sweet oil with low sulfur content, cannot be processed in similar volumes due to its different chemical characteristics.
Building on this, even though the US might be unable to use all the oil it produces, on the surface, it would also appear that fewer regulations on the oil industry and more drilling would be great for the sector. Well, the reality, as is in most cases, is slightly different. This is because low regulations lead to high drilling and end up benefiting firms with high production capacity in the short term. In the long term, as output rises and more companies invest in drilling, the price of oil falls. This appears to be great, after all, who doesn’t like cheap gas prices? However, the US aims to have at least half of all new cars on the roads by 2030 be electric vehicles according to new rules by the Biden Administration. This goal will be fueled by initiatives such as the Inflation Reduction Act (IRA) which has earmarked $500 billion in spending and tax breaks for clean energy technologies and other areas.
So, if half of all new cars by 2030 are EVs and American oil producers end up expanding their production capacity to meet current demand, then they could end up sitting on excess capacity. Oil exploration is one of the most capital intensive industries in the world (upstream capital expenditure sat at $490 billion in 2022 according to the International Energy Forum) and recovering these costs requires steady demand. As a result, if regulations are strict, as opposed to lax, then oil producers will be forced to generate higher margins which carry the chance of improving production efficiency and lead to profit maximization that moves in line with the lower EV costs (and higher proliferation) of the future.
Shifting gears to focus on energy stocks, their performance depends quite a bit on energy prices. This was the case in 2022 when the Russian invasion of Ukraine disrupted the global energy supply chain and led to crude oil prices shooting to as high as $134 per barrel. During the same year, State Street’s energy ETF shot up by 54% as oil companies all over benefited from record revenue and profits. However, the outlook for the energy industry in 2024 isn’t as optimistic.
While the same ETF has gained 9.5% year to date, Brent crude opened 2024 at roughly $78 per barrel and is trading at $78.5 right now. For the second half of 2024, the EIA estimates that it will trade at $89 per barrel – higher than the first half average of $84. This is despite the fact that the world’s largest oil user, China, is facing an uncertain economy that has led some to believe that its oil consumption could drop by 3.8% in the year’s second half with diesel usage dropping by 5.6% annually. In fact, as FactSet notes, this “lower-than-forecast” global demand growth coupled with production increases might lead to an oversupplied oil market. If this is true, then the subsequent downward oil price adjustments could also lead oil stocks lower – and make current valuations overvalued.
With these details in mind, let’s take a look at the best American energy stocks to buy according to analysts.
A row of massive oil rigs in a desert landscape, against a setting sun.
Our Methodology
To make our list of the best American energy stocks to buy according to analysts, we ranked US based energy stocks with a market cap greater than $300 million by their average analyst share price target upside and picked out the stocks with the highest upside.
We also mentioned the number of hedge funds that had bought these stocks during the same filing period. Why are we interested in 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).
14. Vital Energy, Inc. (NYSE:VTLE)
Number of Hedge Fund Investors in Q1 2024: 32
Average Analyst Share Price Target Upside: 51.57%
Average Analyst Share Price Target: $64.75
Vital Energy, Inc. (NYSE:VTLE) is a small oil and gas company headquartered in Tulsa, Oklahoma. The firm, like other American oil producers, is busy expanding its production portfolio through acquisitions. The US shale sector has been focusing on acquisitions for the past two years, and through its deals, Vital Energy, Inc. (NYSE:VTLE) aims to expand its production base in the Delaware base regions. While expanding through acquisitions is a solid growth strategy as it provides oil companies with greater control of assets, Vital Energy, Inc. (NYSE:VTLE) currently has $1.6 billion of debt. The latest acquisition that expanded the firm’s presence in Delaware came with an $880 million price tag will be financed through a revolving credit facility that could strain earnings in the future and force Vital Energy, Inc. (NYSE:VTLE) to operate with greater profitability.
Vital Energy, Inc. (NYSE:VTLE)’s management commented on its production during the Q1 2024 earnings call. Sustained production is key to financing its growth, and according to them:
“As a company, we’re pursuing multiple paths to reduce breakevens and extend inventory. We are improving productivity by extending lateral lengths, pumping high intensity completions, testing and proving up new horizons, implementing a wide array of new technologies, acquiring new assets, improving base operations and so much more. We’ve increased our average well productivity by 35% since 2019, and nearly 95% of our oil production comes from assets we acquired in the past five years. We have been consistent in our strategy to create value by building depth and quality of inventory, while also improving our financial structure and generating free cash flow.”
13. Talos Energy Inc. (NYSE:TALO)
Number of Hedge Fund Investors in Q1 2024: 26
Average Analyst Share Price Target Upside: 54.23%
Average Analyst Share Price Target: $18.06
Talos Energy Inc. (NYSE:TALO) is a Texas based oil and gas producer. A key metric for evaluating small oil and gas companies is the free cash flow, and for Talos Energy Inc. (NYSE:TALO), the firm generated $506 million in FCF in 2023 and has grown this to $548 million in the trailing twelve months. The FCF creates significant room for Talos Energy Inc. (NYSE:TALO) to grow its portfolio of exploration properties, which is key for performance in the US shale industry. The firm already completed an acquisition in March 2024 for a $1.29 billion price tag, and it enabled Talos Energy Inc. (NYSE:TALO) to grow its 2024 oil production guidance by two million barrels. Its current ratio of 0.78 leaves some room for more acquisitions, which should be a key point for the stock moving forward.
Talos Energy Inc. (NYSE:TALO) commented on its balance sheet stability and growth strategy during the Q1 2024 earnings call where it shared:
“We also remain steadfast in our debt reduction goals, as we mentioned earlier, and we have increased that goal from $400 million to $550 million. In our capital investments for 2024, we have a mixed of development and exploration and we believe that is the right mix to create the most value for shareholders in the long run. Lastly, M&A continues to be a pillar of our strategy and we continue to actively seek further accretive M&A opportunities to accelerate our growth trajectory, deliver on our strategy, and create further value for shareholders. And now I’d like to turn the call back to Tim to wrap up with our key takeaways for the quarter.”
12. Ring Energy, Inc. (NYSE:REI)
Number of Hedge Fund Investors in Q1 2024: 9
Average Analyst Share Price Target Upside: 57.89%
Average Analyst Share Price Target: $3
Ring Energy, Inc. (NYSE:REI) is a Texas based company with production assets in its home state and New Mexico. Like other small oil producers, key to its financial viability is the free cash flow. On this front, Ring Energy, Inc. (NYSE:REI) has been performing well and has grown its FCF by 52% on an absolute basis between 2020 and 2023. During its first quarter, the FCF stood at $15.6 million which marked a 48% annual growth, and also marked the 18th consecutive quarter of FCF positivity to indicate a ‘well oiled’ business. Ring Energy, Inc. (NYSE:REI) has also been using its growing FCF to reduce its leverage, and during Q1 it paid down $3 million in debt. Its long term debt grew by 44% to $417 million in 2023 as it expanded production in the lucrative Permian Basin by acquiring assets of another firm for an all cash acquisition of $75 million.
Ring Energy, Inc. (NYSE:REI) is already considering making further acquisitions in the future, with management sharing during the Q1 2024 earnings call:
“We’re predicting that we’re going to see additional assets become available in the Central Basin Platform, the southern part of the Northwest shelf as a result of some of these larger transactions we’ve seen close and/or that are pending. And so many of the operators that have been purchased operate out here and many of the operators that are doing the purchasing and acquiring also have assets out here that have not been their focus and fall in the category that we believe anyway in their halls would be considered non-strategic. So we anticipated them come into the marketplace for sale.
And we’re really excited about this area. We’ve done a lot of mapping. We’ve identified several opportunities out there that we would like. As you may recall, in the past, we have tried to negotiate transactions in the past. That’s how the Stronghold deal started but it ended up being a process that we ultimately prevailed in, Founders was a negotiated deal after a failed sale. And so we’re not opposed to doing that. We are constantly seeking to make acquisitions and that ranges everything from smaller bolt-ons that are just on the other side of the fence from us because it makes a lot of sense. We can continue to play that in the capital programs that we’re currently doing. But at the same time, there’s other areas out there that are very close to our operations that allow us to capture the synergies of our operating team and our expertise.
And so we believe that the pipeline is basically there for the next several years, probably more opportunities than we ourselves can take down. And so we’re excited about it. And so we’ll see how 2024 goes. I think one of the things that we have going for us right now is a little – what appears to be a little bit more stability in oil prices. So if you can stay between $75 and $85 for a sustained period of time, I think you’ll find more people willing to sell. And at the same time, increase the probability of a transaction, just simply because the expectations can – are closer – more closely aligned in a more stable oil price environment. So we’ll see how that goes. But anything from small bolt-ons to large acquisitions that could be as mean as a Stronghold deal and a Founders deal where that were – were for us in the past.”
11. Energy Fuels Inc. (NYSE:UUUU)
Number of Hedge Fund Investors in Q1 2024: 8
Average Analyst Share Price Target Upside: 58.17%
Average Analyst Share Price Target: $8.81
Energy Fuels Inc. (NYSE:UUUU) is one of four uranium stocks on our list, indicating the strong sentiment among analysts for the sector. It is a mining company that extracts uranium and sells it in the market. Since it’s a mining firm, the stock is dependent on factors such as the legal environment of the areas with its mining properties, the amount of resources at Energy Fuels Inc. (NYSE:UUUU)’s disposal, the uptime of its mining facilities, the price that Energy Fuels Inc. (NYSE:UUUU) can fetch for its products, and the overall efficiency of equipment. Additionally, the firm is also a producer of rare earth metals, which could benefit it quite a lot in case the trade tensions between the US and China further deteriorate and lead to Chinese export restrictions. Energy Fuels Inc. (NYSE:UUUU) also claims to have access to 70 million pounds of uranium and the potential to produce six million pounds annually – which could provide it with a wide moat in case the interest in nuclear energy further grows in America.
Energy Fuels Inc. (NYSE:UUUU)’s management is quite optimistic about its unique business model which combines uranium and rare earth metals. During the Q4 2023 earnings call, it shared:
“Yes, I’d just like to thank those of you that have joined the call. I hate to use the word extraordinary too many times, but we really are on a focused path, for a long-term critical mineral hub. There really is no investment like Energy Fuels that can – on the back of uranium adding on the ability, to produce rare earths, for a very significant – world significant strategy, is our objective. Look at our balance sheet, look at the fact that we’re producing uranium now. We’ve got very good margins on our uranium sales, and cost. It is a very exciting time, and I cannot tell you, as I said at the beginning of the call, how excited I am, to present this story and just watch this vehicle, because we are focusing on building a company.
We are not promoters. If you want us to be promoters, we’re not going to be promoters, because we’re building a company, and we’re doing it step-by-step. So, thank you very much. And again, I look forward to further updates in due course during the year.”
10. Centrus Energy Corp. (NYSE:LEU)
Number of Hedge Fund Investors in Q1 2024: 9
Average Analyst Share Price Target Upside: 62.94%
Average Analyst Share Price Target: $69.33
Centrus Energy Corp. (NYSE:LEU) is a nuclear energy company that provides uranium fuel rods and other equipment for nuclear power plants. Its shares are down by 18% year to date, on the back of a disappointing first quarter earnings report which saw Centrus Energy Corp. (NYSE:LEU) report a net loss for the first time in more than a year. This is because the firm’s business is cyclical in nature, and it can only recognize revenue when its customers decide to execute their purchase agreements. Since Centrus Energy Corp. (NYSE:LEU) also depends on uranium imports for its fuel rods, it is also vulnerable to sanctions that came in place after the Russian invasion of Ukraine. However, it scored a win on this front in July 2024 when the US government gave it an import waiver. Centrus Energy Corp. (NYSE:LEU) also enjoys considerable advantages in the US energy market as it is the only uranium enricher and centrifuge manufacturer in America.
Commenting on its future prospects, here’s what Centrus Energy Corp. (NYSE:LEU)’s management had to say during the Q1 2024 earnings call:
“The Ukraine invasion sparked concerns over Russia’s dominance in the nuclear fuel market, causing market prices for enrichment to triple. Meanwhile, a whole new generation of reactors is coming to market. Many of them will require HALEU and will use them for a lot more than just electricity.
They have the potential to provide high temperature heat for industrial processes, like making cement or steel or desalinating water. Google and Microsoft are exploring deploying these new reactors to provide 24/7 power to the vast new data centers that will be needed for AI systems. And next year, the U.S. military will test the prototype of a HALEU-fueled microreactor to meet the needs of our troops and military bases. Recognizing the surging need for clean energy, last year the United States joined with two dozen countries on four continents in a pledge to triple nuclear energy generation by 2050, and joined a subsequent declaration with our closest allies in committing to support new enrichment capacity needed to meet this goal. As a company and as a country, we have a once-in-a-generation opportunity to reclaim American leadership in uranium enrichment.”
9. Dril-Quip, Inc. (NYSE:DRQ)
Number of Hedge Fund Investors in Q1 2024: 15
Average Analyst Share Price Target Upside: 65.77%
Average Analyst Share Price Target: $28.33
Dril-Quip, Inc. (NYSE:DRQ) is a backend oil company that provides drilling equipment and other products and services for offshore and onshore oil production. Its shares are down by 65% over the past five years, despite the fact that its revenue has grown by 16% on an absolute basis between 2020 and 2023. Dril-Quip, Inc. (NYSE:DRQ) is yet to consistently display profitability though, since its 2023 results were the first time since 2020 that it turned a small profit of $604,000. The firm has strong industrial partnerships though, and it works with the Saudi oil giant Aramco and the Brazilian state owned oil company Petrobras. Dril-Quip, Inc. (NYSE:DRQ) ended its Q3 2023 with $200 million in backlog, which provides some visibility into its future revenue especially since its quarterly revenue typically ranges between $100 million to $140 million. Therefore, some key watch points for the stock include the health of Dril-Quip, Inc. (NYSE:DRQ)’s existing partnerships and new long term deals. Any weaknesses on these fronts can translate into headwinds for the share price.
8. Riley Exploration Permian, Inc. (NYSE:REPX)
Number of Hedge Fund Investors in Q1 2024: 9
Average Analyst Share Price Target Upside: 65.91%
Average Analyst Share Price Target: $47.25
Riley Exploration Permian, Inc. (NYSE:REPX) produces oil and gas in Texas and New Mexico. Like other firms, it is on an acquisition spree, and the second half of 2023 was a game changer for Riley Exploration Permian, Inc. (NYSE:REPX). During Q3 and Q4 2023, its free cash flow sat at $21.5 million and $44.8 million, respectively. The Q1 2024 FCF figure was $21 million, which was quite an improvement over the year ago quarter’s negative $2.1 million. Its 2023 performance came on the back of a New Mexico acquisition, and Riley Exploration Permian, Inc. (NYSE:REPX) is also using its strong financial performance to further expand its presence in the region by announcing a new New Mexico acquisition in April 2024. Riley Exploration Permian, Inc. (NYSE:REPX) is also a profitable company, and its trailing twelve month revenue of $407 million marks an 8.8% growth over 2023’s figures. The higher Dril-Quip, Inc. (NYSE:DRQ)’s FCF is, the greater leeway it has to further grow its production base through acquisitions and also return capital to shareholders once the new projects start generating consistent revenue.
Commenting on the latest acquisition, Riley Exploration Permian, Inc. (NYSE:REPX)’s commented during the Q1 2024 earnings call:
“On Tuesday of this week, we closed our previously announced bolt-on acquisition in Eddy County, New Mexico. This will expand our existing operating footprint in New Mexico by adding 13,900 contiguous net acres.
The acreage is largely underdeveloped but is 99% held by production through legacy vertical wells. This acquisition enhances the optionality of our total development inventory by providing high-quality horizontal drilling locations, primarily in the Yeso trend, including the Blinebry, Glorieta and Paddock formations. Furthermore, the acquisition includes valuable infrastructure such as saltwater disposal wells which will optimize operations across our existing New Mexico footprint. We remain focused on creating long-term value for our shareholders and delivering predictable and sustainable growth for years to come. To achieve this, our capital strategy prioritizes discipline to allocate resources to support our growth objectives, while also delivering on our commitment to strengthen the balance sheet and return capital to shareholders in the form of dividends.”
7. Uranium Energy Corp. (NYSE:UEC)
Number of Hedge Fund Investors in Q1 2024: 27
Average Analyst Share Price Target Upside: 72.23%
Average Analyst Share Price Target: $9.80
Uranium Energy Corp. (NYSE:UEC) is another uranium mining company with operations in Texas, Arizona, New Mexico, Canada, and Paraguay. These provide it with a diversified operations base which allows Uranium Energy Corp. (NYSE:UEC) to hedge the effects of a disruption in one production site by managing output in another. At the same time, since it primarily produces uranium and titanium, Uranium Energy Corp. (NYSE:UEC) is also left at the mercy of the broader uranium market since a slow demand for its products means that sales will fall. Like some other uranium producers though, the firm is also targeting the rare earth metals industry which has come under increased analyst, investor, and government focus because of tensions between the US and China. On this front, Uranium Energy Corp. (NYSE:UEC) announced an MOU with an Australian company to develop 14,000 metric tonne rare earth site in Australia.
6. Calumet, Inc. (NASDAQ:CLMT)
Number of Hedge Fund Investors in Q1 2024: 5
Average Analyst Share Price Target Upside: 74.66%
Average Analyst Share Price Target: $22.13
Calumet, Inc. (NASDAQ:CLMT) is a specialty American energy company that provides renewable petroleum products, renewable hydrogen, and other associated products. The firm has been aggressively targeting the renewable fuels market, and it has spent more than $500 million to convert its petroleum refinery into a renewable fuel refinery. This plant will produce sustainable diesel and sustainable aviation fuel, which are widely used across the transportation industry, and it provides Calumet, Inc. (NASDAQ:CLMT) with a nice competitive moat that it could seize to its advantage if the market for these fuels opens up. However, producing renewable fuels is a capital intense industry, and Calumet, Inc. (NASDAQ:CLMT) has $1.8 billion in debt on its balance sheet along with a tight current ratio of 0.99. These can create trouble in the future, particularly if the demand for sustainable fuels fails to materialize.
As for its current and future debt plans, here’s what Calumet, Inc. (NASDAQ:CLMT)’s management had to say during the Q1 2024 earnings call:
“I don’t think that there’s any plan to add debt there and any kind of change to that capital structure will be coincidence with kind of a deal you will own. And so I wouldn’t expect anything there. I can’t give guidance to anything that we may be doing as those kind of conversations are ongoing. So be patient with us there but no expectation to take on kind of incremental debt there unless it’s related to a DOE loan, MAX SAF expansion. And then at the broader level, Calumet focused on deleveraging. And so any cash from operations will be used to pay down debt at the parent and that’s how we think about the deleveraging strategy for the consolidated group.”
5. Ovintiv Inc. (NYSE:OVV)
Number of Hedge Fund Investors in Q1 2024: 34
Average Analyst Share Price Target Upside: 83.28%
Average Analyst Share Price Target: $84.27
Ovintiv Inc. (NYSE:OVV) is a Colorado based oil and gas company with operations in Texas, Oklahoma, Canada, Utah, and other regions. The firm has a considerable presence in one of America’s largest oil production areas, the Permian basin. It expanded its Permian operations in 2023 through a massive $4.3 billion acquisition, and touted additional efficiency increases through a process that Ovintiv Inc. (NYSE:OVV) dubs as ‘Trimul-frac.’ This allows it to save $125,000 per well by fracking three wells at a time instead of two through Simulfrac. However, Ovintiv Inc. (NYSE:OVV)’s Permian expansion has increased its debt load, and it ended 2023 with $6 billion in long term debt. Free cash flow was $1.4 billion during the year, dropping by $600 million annually on the back of higher capital expenditures which also led to lower debt repayments and stock purchases. Looking ahead, production growth, debt repayment, and efficiency improvements will be key for Ovintiv Inc. (NYSE:OVV)’s share price performance.
Ovintiv Inc. (NYSE:OVV)’s management highlighted productivity gains to enable it to reduce the debt load during the Q1 2024 earnings call:
“The combination of strong productivity across the portfolio, our leading capital efficiency and stronger oil price environment have raised our expectations for 2024 free cash flow from $1.6 billion to $1.9 billion, roughly $750 million more than last year with similar volumes and less capital spend.
This will allow us to deliver enhanced returns to our shareholders and accelerate debt repayment. As we highlighted in February, we also added 65 premium 10,000-foot equivalent locations in the Permian through three bolt-on transactions at an average cost of less than $3 million per location. These inventory additions are immediately competitive for capital, and are contiguous with our existing acreage in the core of the Midland Basin. Our multiyear disciplined strategy of both organic and inorganic inventory extension has added about 1,650 premium net 10,000-foot locations to our portfolio, delivering a huge boost to our full cycle returns and the durability of our business. We believe our 2024 program is highly repeatable in 2025 and beyond, reflecting our leading capital efficiency and the depth of our premium inventory.”
4. TETRA Technologies, Inc. (NYSE:TTI)
Number of Hedge Fund Investors in Q1 2024: 23
Average Analyst Share Price Target Upside: 104.97%
Average Analyst Share Price Target: $7.42
TETRA Technologies, Inc. (NYSE:TTI) provides products and services that help oil companies in their drilling operations. It benefits from a diversified business model that allows TETRA Technologies, Inc. (NYSE:TTI) to help dispose of water and sand for firms and enable businesses to produce lithium as well. TETRA Technologies, Inc. (NYSE:TTI) has already teamed up with oil. giant Exxon to mine lithium. This means that TETRA is able to profit from the expansion of US oil production and the potential growth in demand of EVs, simultaneously. TETRA Technologies, Inc. (NYSE:TTI) entered into another deal for an energy storage facility in January 2024, through which it will provide electrolytes for an energy storage facility. This contract will last four years to provide added visibility into TETRA Technologies, Inc. (NYSE:TTI)’s revenue.
TETRA Technologies, Inc. (NYSE:TTI)’s management commented on its projects during the Q1 2024 earnings call where it shared:
“On the energy storage side, we remain in close contact with Eos are very encouraged with the progress they’re making on automating their first production line. We fully expect Eos to be up and running their Z3 zinc bromine battery automation line in the second half of this year, which is expected to result material sales of electrolyte from TETRA. In the coming weeks, we’re hopeful to have our first commercial desalination for beneficial reuse contract in place that should be operational by the first part of 2025.
This is planned to be a 24,000 barrel a day South Texas facility. We’re also in discussions for a one-year commercial pilot project in the New Mexico area of the Delaware Basin using TETRA’s proprietary pretreatment technology and our solution for higher total dissolved solids. We’re in the process of tying the legal terms and conditions together for these two projects, which has delayed our first project slightly but we’re optimistic to close on both of these opportunities in the near-term. The demand for beneficial reuse projects continues to build, as this solution is the ultimate answer to overpressure disposal wells in areas like the Permian Basin that need usable water sources.”
3. Ur-Energy Inc. (NYSE:URG)
Number of Hedge Fund Investors in Q1 2024: 18
Average Analyst Share Price Target Upside: 159.17%
Average Analyst Share Price Target: $3.11
Ur-Energy Inc. (NYSE:URG) is a uranium mining company with operations in Wyoming. This means that its performance is contingent on uranium reserves, annual production, and the general health of the uranium industry. The last bit is particularly important since Ur-Energy Inc. (NYSE:URG) relies primarily on selling uranium to generate sales. Its lead mining facility is Lost Creek, which has a life of ten years and the capability to produce 2.2 million pounds per year. Ur-Energy Inc. (NYSE:URG) also benefits from clean energy initiatives in the Inflation Reduction Act which seeks to maintain more than 90 nuclear reactors in America. Dril-Quip, Inc. (NYSE:DRQ) also benefits from the fact that it does not have to depend on uranium imports. Recent trends in geopolitics, spurred by the Russian invasion of Ukraine have led to sanctions against Russian Ukraine imports. This opens up a large market for Dril-Quip, Inc. (NYSE:DRQ), which might also benefit from a growing interest in nuclear power and government spending on clean energy.
Another key aspect of Ur-Energy Inc. (NYSE:URG)’s performance is off take agreements, which help ensure a stable demand for its products. Here’s what management had to say on this front during the Q1 2024 earnings call:
“But the existing production in the near-erm production from our two flagship properties will come from Lost Creek, which is in production and Shirley Basin, which we’re entering construction now. So, starting with Lost Creek, it’s been in production now for over 10 years.
And in that time period, we have produced nearly three million pounds of U308. U308 is the chemical formula for a yellow cake, which is the product we produce. We recently made the decision to restart production and we’ve been bringing new Header Houses online. Again those Header Houses are the new production areas and we were able to make that decision to go and to ramp production back up, because of the contract book. And I’ll be talking in some detail about our contracts. But suffice it to say early on we had three contracts in place that gave us the faith that it was time to ramp production back up. We’re in the process of that. And since then we have signed three more offtake agreements that total nearly six million pounds plus or minus flex.
That’s over a time period of now through 2030. We also have one of those contracts that has an option for extending for three additional years. We have a very good resource at Lost Creek, nearly 12.7 million pounds of the measured and indicated resource. In addition to that, we have a little over six million pounds of inferred resource, and I’ll make a forward-looking statement here, but we do believe we have considerable opportunity to expand that resource through exploration in the future.”
2. Clean Energy Fuels Corp. (NASDAQ:CLNE)
Number of Hedge Fund Investors in Q1 2024: 20
Average Analyst Share Price Target Upside: 167.04%
Average Analyst Share Price Target: $7.13
Clean Energy Fuels Corp. (NASDAQ:CLNE) is a new energy company that provides natural gas for commercial transportation as well as renewable natural gas. It is one of the earliest movers in its industry, which allows Clean Energy Fuels Corp. (NASDAQ:CLNE) a considerable competitive moat at its advantage. However, at the same time, its performance is also contingent on the broader market use of natural gas for transportation and commercial vehicles. Therefore, Clean Energy Fuels Corp. (NASDAQ:CLNE) has to carefully balance its production capacity with the demand, and any mismatches could lead to either costly excess capacity or under capacity that leads to new market entrants. Additionally, its industry also requires Clean Energy Fuels Corp. (NASDAQ:CLNE) to invest heavily to create the market for its industries. This leads to debt, which pushed FCF to negative in 2023. Clean Energy Fuels Corp. (NASDAQ:CLNE) hasn’t generated a profit in its last four fiscal years either.
Clean Energy Fuels Corp. (NASDAQ:CLNE)’s management is optimistic for its market though, as it commented during the Q1 2024 earnings call:
“It pleases me to say that we kicked off 2024 with a strong first quarter. Our base business of fueling fleets, constructing and maintaining stations for those fleets, and providing other services that keeps trucks, shuttles and buses operating on a clean fuel performed well. We also made good progress in our business of developing renewable natural gas dairy projects. I’ll expand with a few more details on both in a moment. The 8.6% year-over-year growth in RNG fuel volumes is a testament to the stability and growth in our base business. In addition, it reflects the significant RNG volume that is now flowing through the new state-of-the-art fueling stations that we have built and opened over the last two years, where we have an anchor customer in Amazon.
We are also seeing other vehicles begin to fuel at these stations, which helps our fuel margins. As always Bob will give you more details about our financial results, but I would be remiss in not calling out the $12.8 million in adjusted EBITDA for Q1 compared to minus $4 million of Q1 of last year. The significant upswing is attributed to the growth in our core business that I just mentioned, as well as circumstances which we found ourselves during the beginning of last year with historically high natural gas prices in California that impacted our bottom line. Our balance sheet remains strong with almost $250 million of cash and investments on hand. And you should see continued, improved adjusted EBITDA results through this year. I’d like to take a moment to address the environmental credit situation because I think some might tie the ups and downs of those prices a little too tightly to our overall business.”
1. W&T Offshore, Inc. (NYSE:WTI)
Number of Hedge Fund Investors in Q1 2024: 22
Average Analyst Share Price Target Upside: 329%
Average Analyst Share Price Target: $10
W&T Offshore, Inc. (NYSE:WTI) is a Texas based oil and gas producer with operations in the Gulf of Mexico. Like other US oil production firms, it is also growing through acquisition despite being limited to offshore drilling due to its presence in the Gulf of Mexico. W&T Offshore, Inc. (NYSE:WTI) closed a $72 million deal to expand its operations in the region in January 2024, and it contributed to a 30% growth in its production during the first quarter of 2024. The move also led to W&T Offshore, Inc. (NYSE:WTI)’s operating income growing by 10% over the previous quarter, to sit at $49.4 million. However, at the same time, the firm has to ensure that its growing production base does not suffer from any production shutdowns and also ensure that the new wells that it has acquired are able to profitably produce.
During the Q4 2023 earnings call, W&T Offshore, Inc. (NYSE:WTI)’s management shed light on its efficiency improvements when it shared:
“So while we were very busy from a financial acquisition standpoint, we also executed operationally. So for the first, well, for the full year 2023, we generated $15.6 million in net income, $183.2 million in adjusted EBITDA and $63.3 million in free cash flow. We delivered strong production of 34,900 barrels of oil equivalent per day. And we continue to pay down debt with net debt falling to $217.3 million. We adopted a quarterly cash dividend policy paying an initial dividend in December 2023 and announced the first quarter 2024 payment will occur later this month. So we continue to execute at a high level generating strong adjusted EBITDA and free cash flow despite decreases in pricing because it’s such an integral part of our strategy, I’d like to reiterate one more time.
The fourth quarter of 2023 marked the 24th consecutive quarter we have generated free cash flow. So coupled with our ability to pay down debt and improve our balance sheet, we’re in a strong financial position in 2024 and we remain focused on operational execution to build on these solid results.”
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