In this piece, we will take a look at seven cheap energy stocks to buy under $20.
The energy sector is undergoing a major transformation in 2024, driven by a combination of evolving market dynamics, fluctuating commodity prices, and the increasing role of renewable energy sources. As investors navigate this changing environment, they are met with both opportunities and challenges. While oil prices show signs of stability, renewable energy adoption continues to gain momentum, creating a unique landscape for energy stocks.
Brent crude oil prices are expected to stabilize around $82 per barrel, reflecting a slight uptick from $81 in 2023. This stabilization signals a return to pre-pandemic levels, a trend supported by strategic production cuts from OPEC+. Market analysts predict that these cuts will help maintain the delicate balance between supply and demand, which is pivotal in shaping the oil markets in 2024. Meanwhile, the average retail gasoline prices are forecasted to remain steady at $3.30 per gallon over the next two years. This stability, combined with the growth in U.S. crude oil production—from 12.9 million barrels per day in 2023 to an anticipated 13.3 million barrels per day in 2024—reflects a strong domestic supply environment.
In addition to crude oil, the U.S. liquefied natural gas (LNG) sector is expected to witness robust growth. Gross LNG exports are projected to increase from 12 billion cubic feet per day in 2023 to 14 billion in 2025, highlighting the U.S.’s evolving role as a significant player in the global energy markets. The rise in LNG exports is likely to boost the country’s influence in international energy trade, positioning it as a key energy exporter in the coming years.
Natural gas prices at Henry Hub are also poised for changes. While prices are expected to stay relatively stable at $2.20 per million British thermal units (MMBtu) in the near term, they are projected to surge to around $3.10/MMBtu in 2025. This increase reflects the interplay between the rising production capabilities and the growing export demands of the U.S. energy sector. Notably, the shift toward biomass-based diesel products, which now account for 9% of total distillate fuel consumption, underscores the sector’s movement toward more sustainable fuel options amid growing environmental concerns.
The electricity generation landscape in the U.S. is also seeing significant shifts. While natural gas remains the primary source, contributing 42% of total electricity generation, the share of renewables is increasing rapidly—from 21% in 2023 to an expected 25% by 2025. Solar energy, in particular, is leading this charge. The first half of 2024 saw solar energy account for 59% of new generating capacity additions, driven largely by advancements in battery storage technologies. States like Texas and California are expected to be at the forefront of solar generation, reflecting the broader trend of transitioning to green energy.
These shifts in the energy landscape are supported by a steady economic environment. The U.S. GDP is projected to grow by 2.6% in 2024, providing a solid backdrop for energy market developments. However, CO2 emissions are forecasted to remain steady at 4.8 billion metric tons, emphasizing the ongoing challenges of balancing energy production with environmental sustainability. As climate change becomes a more pressing issue, energy companies are under increasing pressure to innovate and adopt more sustainable practices.
Geopolitical tensions, such as the political instability in Libya, add another layer of complexity to the energy markets. These events can lead to unexpected production outages, influencing global oil supply and prices. Despite these uncertainties, the energy sector’s fundamentals appear strong, offering promising opportunities for discerning investors. The combination of ongoing production cuts by OPEC+ and strong demand from non-OECD countries is expected to drive an increase in oil consumption, enhancing the appeal of energy stocks in 2024.
Given this backdrop, identifying the best energy stocks under $20 becomes crucial for investors looking to capitalize on the anticipated shifts in the sector. The companies featured in this analysis are well-positioned to benefit from the evolving energy landscape.
Photo by David Thielen on Unsplash
Our Methodology
For this article, we utilized the Finviz stock screener to identify stocks within the energy sector that have forward price-to-earnings (P/E) ratios below 15 as of September 29. From this initial list, we focused on seven stocks that are most favored by institutional investors. These stocks were then ranked in ascending order of the number of hedge funds holding stakes in them, as of Q2 2024.
At Insider Monkey we are obsessed with 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).
07. NOV Inc. (NYSE:NOV)
Number of Hedge Fund Holders: 29
Forward P/E Ratio as of September 29: 6
NOV Inc. (NYSE:NOV) is a prominent global provider of equipment and technologies for the oil and gas, industrial, and renewable energy sectors. Given its strategic role in developing resilient infrastructure and its robust portfolio of drilling equipment, production technologies, and hydraulic fracture tools, NOV Inc. (NYSE:NOV) should be considered a strong candidate for inclusion among cheap energy stocks to buy. With a forward P/E ratio of 6, the stock is attractively valued, making it an appealing option for investors looking to capitalize on the company’s continued growth and stability in a volatile market.
For the second quarter of 2024, NOV Inc. (NYSE:NOV) demonstrated strong financial performance, underscoring its operational strength and focus on high-margin markets. The company reported revenues of $2.22 billion, representing a 6% year-over-year increase, and a net income of $226 million, translating to earnings of $0.57 per diluted share. This marked a substantial improvement of $0.18 per share compared to the same period last year. Furthermore, EBITDA surged by 15% to $281 million, with EBITDA margins expanding to 12.7%, driven by cost-saving initiatives and a favorable revenue mix.
NOV Inc. (NYSE:NOV) success is bolstered by its strategic shift towards high-margin international and offshore markets. During the quarter, the company saw a significant rise in bookings for flexible pipe solutions, particularly for deepwater FPSO developments and well intervention equipment in offshore regions. The book-to-bill ratio was nearly 180%, reflecting the strong demand for NOV Inc. (NYSE:NOV) products and services in these high-growth markets. Additionally, the company’s cost-saving measures have resulted in approximately $75 million in annualized savings, further strengthening its profitability amid a challenging North American market environment.
NOV Inc. (NYSE:NOV) has also adopted advanced artificial intelligence solutions to optimize manufacturing processes, enhance capacity utilization, and reduce production costs. This technological integration has not only improved the company’s operational efficiency but also solidified its competitive advantage within the energy equipment sector.
As of Q2 2024, 29 hedge funds hold positions in NOV Inc. (NYSE:NOV), down slightly from 33 in the previous quarter. Despite this modest decline in institutional interest, the stock remains fundamentally strong, supported by stable cash flows, expanding EBITDA margins, and solid international growth prospects. Given these factors, NOV Inc. (NYSE:NOV) offers a compelling investment opportunity for those seeking exposure to energy stocks.
06. MRC Global Inc. (NYSE:MRC)
Number of Hedge Fund Holders: 30
Forward P/E Ratio as of September 29: 14.41
MRC Global Inc. (NYSE:MRC) stands out as an attractive option among cheap energy stocks under $20 due to its solid financial position and fundamental strength. The stock boasts a forward P/E ratio of 14.41, making it relatively inexpensive compared to many peers. The company, founded in 1921 and headquartered in Houston, Texas, distributes pipes, valves, fittings, and infrastructure products and services across the United States, Canada, and globally, making it a key player in supporting oil, gas, and industrial sectors.
MRC Global Inc. (NYSE:MRC) strong performance in Q2 2024 reflects the strength of its fundamentals. The company generated $63 million in operating cash flow during the second quarter and $101 million for the first half of the year, driven by effective working capital management. Management reaffirmed guidance for generating over $200 million in operating cash flow for the full year, highlighting the company’s consistent cash flow generation capability. MRC Global reported second quarter revenue of $832 million, up 3% from the previous quarter, led by robust growth in the gas utilities and PTI sectors.
The company’s adjusted gross margins were 22.1%, marking a record-high quarterly result. Adjusted EBITDA margins also improved to 7.8%, showcasing strong cost management and operational efficiency. MRC Global’s balance sheet continues to strengthen, ending the quarter with $103 million in net debt and a leverage ratio of 0.4x, a record low for the company. Management expects these metrics to improve further as cash generation continues to be strong throughout the remainder of the year.
MRC Global Inc. (NYSE:MRC) also noted increased project activity in international markets, particularly in the North Sea and Middle East, contributing to a 15% year-over-year and 11% sequential revenue growth in its international business. The company’s agreement with ExxonMobil to be a primary supplier of PVF products in North America also positions it well for future growth. Furthermore, hedge fund interest in MRC Global Inc. (NYSE:MRC) increased to 30 holders as of Q2 2024, compared to 29 in the previous quarter, reflecting growing institutional confidence in the company’s prospects. With a diversified business model, strong cash flows, and improving margins, MRC Global Inc. (NYSE:MRC) is well-positioned to continue delivering value to shareholders, making it a solid pick among cheap energy stocks under $20.
05. Liberty Energy Inc. (NYSE:LBRT)
Number of Hedge Fund Holders: 31
Forward P/E Ratio as of September 29: 7.57
Liberty Energy Inc. (NYSE:LBRT) is a key player in the energy services industry, specializing in providing hydraulic fracturing services and related technologies to oil and gas exploration companies across North America. The company was founded in 2011 and is headquartered in Denver, Colorado. With a forward P/E ratio of 7.57, the stock presents an attractive valuation, making it a solid addition to a list of cheap energy stocks to consider under $20. Liberty Energy Inc. (NYSE:LBRT) operates in several key shale basins, including the Permian Basin, Williston Basin, and Eagle Ford Shale, among others. The company also has an extensive portfolio of assets, comprising approximately 40 active hydraulic fracturing fleets and two sand mines, which position it strongly within the energy services sector.
For the second quarter of 2024, Liberty Energy Inc. (NYSE:LBRT) reported revenue of $1.2 billion, up by 8% from the previous quarter, and adjusted EBITDA of $273 million, a 12% sequential increase. The company achieved these results despite a slight decline in industry-wide drilling and completions activity, underscoring its operational efficiency and robust business model. Liberty Energy Inc. (NYSE:LBRT) average daily pumping efficiencies and record safety performance were key contributors to its strong performance, reflecting its competitive edge and industry leadership. The company also recorded a 28% adjusted pre-tax return on capital employed over the trailing 12 months ending June 30, 2024, highlighting its commitment to maximizing shareholder value.
In addition, Liberty Energy Inc. (NYSE:LBRT) generated substantial cash flow, distributing $41 million to shareholders in the second quarter alone. Since reinstating its capital return program two years ago, the company has returned $458 million to shareholders, further demonstrating its strong financial health and shareholder-friendly approach. The stock is also seeing increased interest from institutional investors, with 31 hedge funds holding positions in Liberty Energy as of Q2 2024, up from 30 in the previous quarter.
Liberty Energy Inc. (NYSE:LBRT) ongoing investments in innovative technologies, such as its AI-empowered logistics platform, Sentinel, and natural gas-fueled pumping and power generation technologies, continue to drive efficiency and cost reductions for the company and its clients. With favorable industry trends and a disciplined capital allocation strategy, Liberty Energy Inc. (NYSE:LBRT) is well-positioned to continue delivering solid financial and operational results, making it a compelling choice for investors looking for cheap energy stocks with strong growth potential.
04. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)
Number of Hedge Fund Holders: 31
Forward P/E Ratio as of September 29: 5.91
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) is a Brazilian integrated oil and gas company engaged in exploration, production, refining, and distribution. The company operates through three primary segments: Exploration and Production; Refining, Transportation and Marketing; and Gas and Power. With a forward P/E ratio of 5.91, Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) offers investors a low valuation opportunity in the energy sector. The stock should be included in the list of cheap energy stocks to buy under $20 due to its consistent performance and strong fundamentals.
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) delivered a solid performance in Q2 2024, achieving a net income of $5.4 billion and an EBITDA of $12 billion, in line with the previous quarter. The company reported operating cash flow of approximately $10 billion, demonstrating robust cash generation despite foreign exchange volatility. These strong financial metrics, combined with efficient production and refining operations, position Petrobras as an attractive investment for value-seeking investors.
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) has been investing heavily in its future growth, particularly in its pre-salt operations, which contributed 81% of its total oil and gas production during the second quarter. The company is expected to start production ahead of schedule at the FPSO Maria Quitéria in the Jubarte field, with an estimated output capacity of 100,000 barrels of oil and 5 million cubic meters of gas per day. Furthermore, the Almirante Tamandaré unit, scheduled to start operations next year, is expected to have a production capacity of 225,000 barrels of oil per day and 12 million cubic meters of gas per day, further solidifying the company’s production capabilities.
On the refining side, Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) maintained a high utilization rate of above 90%, which is indicative of its operational efficiency. The ongoing construction of the Rota 3 gas pipeline will further enhance its supply of natural gas, reducing imports and bolstering domestic availability.
Despite experiencing a decrease in hedge fund holders from 40 in Q1 2024 to 31 in Q2 2024, Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) remains a strong candidate for investors seeking exposure to the energy sector due to its attractive valuation, substantial production assets, and strategic investments in new projects that promise future growth and profitability.
03. Energy Transfer LP (NYSE:ET)
Number of Hedge Fund Holders: 32
Forward P/E Ratio as of September 29: 13.60
Energy Transfer LP (NYSE:ET) is a prominent energy company involved in the transportation, storage, and sale of natural gas, crude oil, and related products across the United States. With a robust infrastructure, including 20,090 miles of interstate natural gas pipelines, and operations in key energy-producing states such as Texas and Oklahoma, Energy Transfer LP (NYSE:ET) is well-positioned in the industry. The stock is a compelling addition to the list of cheap energy stocks, as it trades at a forward P/E Ratio of 13.60, making it attractively valued compared to peers. As of Q2 2024, the company had 32 hedge fund holders, consistent with the previous quarter, reflecting steady institutional interest.
In the second quarter of 2024, Energy Transfer LP (NYSE:ET) outperformed earnings expectations, reporting an EPS of $0.35 against the consensus estimate of $0.3481. This solid financial performance is underpinned by record volumes in its crude oil and natural gas liquids (NGL) pipelines and exports. The company posted an adjusted EBITDA of $3.76 billion for the quarter, a notable increase from $3.1 billion in Q2 2023. The growth was primarily driven by strong performance in the NGL and refined products segments, which generated an adjusted EBITDA of $1.07 billion, compared to $837 million in the previous year.
The midstream segment also saw growth, with an adjusted EBITDA of $693 million, up from $579 million in Q2 2023, supported by higher volumes in the Permian Basin and the addition of Crestwood assets. Energy Transfer LP (NYSE:ET) acquisition strategy continues to enhance its financial performance and asset base. The company completed the acquisition of WTG in July 2024, which significantly strengthens its natural gas and NGL operations in the Permian Basin.
Moreover, Energy Transfer LP (NYSE:ET) commitment to expanding its infrastructure is evident in its ongoing projects, such as the $1 billion spent on organic growth capital in 2024. With its comprehensive pipeline network, strong cash flow generation, and strategic growth initiatives, Energy Transfer LP (NYSE:ET) remains an attractive option for investors seeking exposure to the energy sector under $20 per share.
02. Cenovus Energy Inc. (NYSE:CVE)
Number of Hedge Fund Holders: 46
Forward P/E Ratio as of September 29: 8.94
Cenovus Energy Inc. (NYSE:CVE) is an integrated energy company based in Calgary, Canada, engaged in developing, producing, refining, and marketing crude oil, natural gas, and refined products in Canada and globally. The company operates across several segments, including Oil Sands, Conventional, Offshore, Canadian Refining, and U.S. Refining, making it a diversified player in the energy sector. Cenovus Energy Inc. (NYSE:CVE) has a forward P/E ratio of 8.94, making it an attractive inclusion among cheap energy stocks trading under $20. The company’s low valuation, coupled with solid fundamentals, positions it as a compelling investment option for value-focused investors looking for exposure to the energy sector.
Cenovus Energy Inc. (NYSE:CVE) reported strong second-quarter 2024 results, driven by its efficient operational performance and disciplined financial management. The company achieved its net debt target of $4 billion in July, which is a significant milestone, allowing it to shift its focus towards returning excess free funds flow to shareholders. During Q2 2024, Cenovus Energy Inc. (NYSE:CVE) generated an operating margin of $2.9 billion and free funds flow of $1.2 billion, supported by robust benchmark crude oil prices and a narrowing light-heavy differential. The company’s oil sands segment, which produced approximately 610,000 barrels per day, saw an operating margin increase of $500 million compared to the prior quarter, reflecting its ability to optimize production and reduce costs.
The company’s commitment to enhancing shareholder value was further highlighted by its efforts in reducing operational costs and improving efficiency across its segments. Production in the conventional segment rose by 2,400 BOE per day, while offshore production increased by 1,300 BOE per day from the previous quarter, demonstrating steady growth. Cenovus Energy Inc. (NYSE:CVE) also remains on track with its oil sands growth projects, including the Narrows Lake tie-back to Christina Lake and the Foster Creek Optimization Project, both of which are expected to drive future growth.
Moreover, hedge fund interest in Cenovus Energy Inc. (NYSE:CVE) increased in Q2 2024, with 46 funds holding positions, up from 44 in the previous quarter. This growing institutional interest signifies confidence in the company’s financial health and strategic direction, making Cenovus Energy a strong contender in the list of cheap energy stocks to buy now.
01. Permian Resources Corporation (NYSE:PR)
Number of Hedge Fund Holders: 51
Forward P/E Ratio as of September 29: 10.84
Permian Resources Corporation (NYSE:PR) is an independent oil and natural gas company headquartered in Midland, Texas. It primarily focuses on the development of crude oil and liquids-rich natural gas reserves in the Delaware Basin, a sub-basin of the Permian Basin, which spans West Texas and New Mexico. With a forward P/E ratio of 10.84, the stock is a compelling choice for investors seeking cheap energy stocks with robust fundamentals. Its strategic acquisition efforts and operational efficiency make Permian Resources Corporation (NYSE:PR) a strong candidate for inclusion in a portfolio focused on undervalued energy stocks.
In its second-quarter earnings report for 2024, Permian Resources Corporation (NYSE:PR) demonstrated outstanding performance, highlighted by an increase in oil production to 153,000 barrels per day and total production of 339,000 barrels of oil equivalent per day. This outperformance led the company to raise its full-year production guidance for the second consecutive quarter, reflecting its operational strength and cost-efficiency measures. The company’s drilling and completion (D&C) efficiencies resulted in a 13% reduction in costs compared to 2023, enabling it to increase its 2024 Turn-in-Line (TIL) guidance by approximately 15 wells without adjusting its capital expenditure ranges.
Additionally, Permian Resources Corporation (NYSE:PR) recent acquisition of the Barilla Draw assets from OXY for $817 million is expected to add significant value, given its 3.4x EBITDA multiple and 17% free cash flow yield. This acquisition fits well within the company’s existing footprint and is expected to drive future growth with over 200 high-return drilling locations that compete for capital.
The company’s strong cash flow generation is evident in its Q2 adjusted operating cash flow of $849 million, or $1.10 per share, and adjusted free cash flow of $332 million, or $0.43 per share. Furthermore, Permian Resources Corporation (NYSE:PR) returned $0.25 per share to shareholders in Q2 through dividends and share buybacks, underscoring its commitment to delivering shareholder value. The company’s growing institutional interest is reflected in the increase in hedge fund holders from 41 in the previous quarter to 51 in Q2 2024, highlighting confidence in its growth potential.
With its solid financial performance, low-cost leadership, and strategic acquisitions, Permian Resources Corporation (NYSE:PR) stands out as one of the best cheap energy stocks under $20 to buy now.
While we acknowledge the potential of PR to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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