8 Most Undervalued Oil Stocks To Buy According To Analysts

06. Borr Drilling Limited (NYSE:BORR)

Upside Potential: 59%

Forward Price to Earnings (P/E) ratio: 5.64

Number of Hedge Fund Holders: 11

Borr Drilling Limited (NYSE:BORR) stands out as an attractive buy among undervalued oil stocks, offering a unique investment opportunity with strong financial metrics. As of October 14, 2024, the stock has a forward P/E ratio of just 5.64, indicating that it is trading at a steep discount compared to industry peers. With a target price of $8.43, the stock presents an upside potential of 59% from its current share price of $5.29.

Borr Drilling Limited (NYSE:BORR) is a global player in offshore shallow-water drilling, specializing in operating jack-up rigs for oil and gas companies. The company’s fleet includes 24 modern rigs, positioning it favorably in a market facing supply constraints. With no new rigs ordered in the last decade and 30% of the global fleet over 35 years old, Borr Drilling Limited (NYSE:BORR) young and premium rigs are well-positioned to benefit from higher utilization and day rates.

The company’s Q2 2024 financial performance reflects this strong market position. Borr Drilling Limited (NYSE:BORR) reported $271.9 million in operating revenue, a 16% increase from Q1, driven by higher day rates and strong contract activity. Adjusted EBITDA rose 17% quarter-over-quarter to $136.4 million, underscoring efficient operations and high rig utilization. Furthermore, the company reported a net income of $31.7 million for the quarter, more than doubling from Q1, signaling improved profitability.

Borr Drilling Limited (NYSE:BORR) liquidity is solid, with $344 million available through cash and credit facilities. This financial strength supports ongoing investments and shareholder returns, as evidenced by the recent quarterly dividend of $0.10 per share. Additionally, the company continues to secure high-value contracts, such as the recent long-term deal for the Arabia I rig in Brazil, which is expected to enhance revenue visibility through 2025.

Borr Drilling Limited (NYSE:BORR) strategy of locking in accretive contracts, combined with a robust backlog and a tight rig market, creates a favorable environment for future growth. With 73% of its 2025 capacity already contracted, Borr Drilling Limited (NYSE:BORR) offers strong revenue visibility and the potential for share price appreciation, making it a compelling addition to any portfolio focused on undervalued oil stocks.