In this article, we will look at the Best Oil Stocks under $20.
The oil industry has long been criticized for its contributions to greenhouse gas emissions and global warming. Despite these concerns, oil remains a critical commodity in today’s world as it has historically played a pivotal role in the global industrial, household, and power sectors.
The dynamics of the oil market shifted dramatically two years ago following Russia’s invasion of Ukraine. Western sanctions on Russia, combined with efforts by European nations to reduce reliance on Russian crude, disrupted global supply chains and drove oil prices to record highs. As mentioned in our previous article ‘10 Best Oil Stocks Under $20’, prices soared to $119 per barrel in March 2023. The impact of sanctions remains, as Russia’s monthly revenue from seaborne crude oil registered a significant 15% decline in May 2024 compared to the previous month, as reported by The Centre for Research on Energy and Clean Air.
Demand and Supply in the Oil Market
According to the International Energy Agency, the global oil industry faces a challenging landscape, with slow demand growth coupled with supply chain disruptions. In the first half of 2024, the demand grew by just 800,000 barrels per day (kb/d), which is the slowest increase since 2020. The main contributor to this declining demand is the consistent drop in China’s consumption in the past four months. The trend in 2024 contrasts with the 2.1 million barrels per day (mb/d) surge in demand seen in 2023. The slowdown in China’s economy, combined with the shift towards electric vehicles, has driven the decline in global consumption.
On the other hand, the global supply increased in August by 80 kb/d, jumping to 103.5 mb/d. This surge was bolstered by high outputs from countries including Brazil and Guyana. This high demand balanced the production outages in Libya as well as maintenance-related slowdowns in Norway and Kazakhstan. However, OPEC+ countries are expected to face challenges, with supply projected at 810 kb/d by the end of 2024.
Although weaker-than-expected performance in China and falling margins in Europe are putting pressure on refinery activities, refinery output is expected to increase by 440 kb/d in 2024. Moreover, oil prices have declined, with Brent falling by over $10 per barrel in August and early September. This was mainly driven by concerns about Chinese demand, coupled with oversupply fears, according to IEA.
Despite challenging circumstances, companies are positioning themselves to align with shifting market dynamics. As a result, the crude oil industry is expected to surge at a compound annual growth rate (CAGR) of 1.8% until 2030, with an expected valuation of $1.6 trillion, according to Maximize Market Research.
Performance of Oil Stocks
Following the decline in oil prices, energy sector stocks have also delivered a mixed performance. The Energy sector surged by 13.3% on a year-to-date basis through July 2024. However, it still lagged behind the broader index by 3%. Thus, with a rapidly changing global scenario, energy sector stocks are expected to see swift movements in the near future.
Having discussed the global oil industry, let’s now look at the 7 Best Oil Stocks Under $20.
A hand holding a crude oil sample from a well in Permian Basin.
Methodology
For this list, we scanned the Finviz screener and selected companies involved in the oil industry, focusing on areas relevant to oil production and its products. From that list, we selected companies with share prices under $20 as of September 24, 2024.
Among those, we chose seven companies with the highest number of hedge fund holdings and ranked them in ascending order based on these holdings, as of Q2 2024. Hedge fund data was sourced from Insider Monkey’s hedge fund database, which tracks the activity of 912 hedge funds.
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).
7. Helix Energy Solutions Group, Inc. (NYSE:HLX)
Number of Hedge Funds Holders: 29
Share Price: $10.33
Helix Energy Solutions Group, Inc. (NYSE:HLX) specializes in a range of services for the offshore industry. The company operates across four segments: Well Intervention, Robotics, Production Facilities, and Shallow Water Abandonment.
Helix Energy Solutions Group, Inc. (NYSE:HLX) reported a revenue of $365 million in Q2 2024. This was significantly up from $296 million in Q1 and $309 million in the same quarter of the previous year. Net income was reported at $32 million, which is a significant recovery from a net loss of $26 million in the previous quarter. Additionally, it reported a strong cash equivalents balance of $275 million, which translated into a total liquidity balance of $370 million by the end of Q2.
The Well Intervention and Robotics segment delivered a strong performance with projects in trenching, along with several deployments in Australia. The Q7000 was deployed in Australia with plans to transition to Brazil for a six-month contract. Moreover, the Q4000 will transition to a six-month contract in Nigeria after completing work in the Gulf of Mexico. This movement will generate strong demand in West Africa. Helix Energy Solutions Group has also been discussing rate increases, particularly in Brazil. This is expected to enhance the profitability of oil-related operations.
Despite the positives, the shallow water abandonment market in the Gulf of Mexico has faced unpredictability. Operators are expected to spend less due to the sluggish working environment. In addition, the output from existing facilities has declined, limiting their contributions. This poses a challenge for the company amidst fluctuating commodity prices. As a result, the stock has declined by nearly 7% in the past month.
However, Helix Energy Solutions Group, Inc. (NYSE:HLX) is expected to add more wells to its production backlog. As of Q2 2024, 29 hedge funds tracked by Insider Monkey have collectively invested $209 million in the company, placing it on the list of the best energy stocks to buy.
6. NOV Inc. (NYSE:NOV)
Number of Hedge Funds Holders: 29
Share Price: $16.90
NOV Inc. (NYSE:NOV) designs and manufactures equipment and systems for the industrial, renewable energy, and oil & gas sectors. The company also offers services ranging from drilling optimization to equipment repair. It also has expertise in drilling, hydraulic fracturing, and offshore production.
NOV Inc. (NYSE:NOV) reported revenue of $2.2 billion in Q2 2024, which is an 8% increase from Q2 2023. This increase was mainly driven by strong demand in international markets and improved aftermarket sales in the Energy Equipment segment. Gross margin also improved, with EBITDA reported at $142 million, resulting in an EBITDA margin of 11.8%. The increase in margin was primarily due to cost-saving initiatives, a higher-quality backlog, and a favorable shift in the sales mix.
The Energy Products and Services segment saw increased revenue in the service and rental business. The company saw strong growth in the Permian Basin due to its advanced drill bit designs. In addition, the downhole tool rentals rose 3% on a year-over-year basis due to steady demand for technologies that support complex drilling.
However, NOV Inc. (NYSE:NOV) faced significant challenges due to a decline in North American drilling activity. The 12% drop significantly impacted the company’s revenue from services and rentals business. Additionally, Tuboscope reported a revenue decline due to reduced demand for oilfield tubular inspections. The company has warned that the Intervention & Stimulation equipment unit has continued to face weak demand in North America, which will hinder the company’s revenue growth. As a result, the stock price has dropped by 12% over the past six months.
Despite this, NOV’s backlog for subsea flexible pipe has grown significantly, with demand stretching into 2027. The company also expects improved international demand to offset the weak performance in North America. As of Q2 2024, 29 hedge funds have collectively invested $1.3 billion in the company, according to Insider Monkey’s database. As a result, NOV makes it to our list of the best energy stocks under $20 to buy.
5. Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)
Number of Hedge Funds Holders: 31
Share Price: $14.40
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) engages in the exploration, production, and marketing of oil and gas both domestically and internationally. Based in Brazil, the company operates through three segments: Exploration & Production, Refining, and Gas & Power. It also drills, processes, and transports crude oil from onshore and offshore oil fields.
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) achieved a net income of $5.4 billion in Q2 2024, reflecting a steady operational performance despite a challenging exchange rate environment. This success was mainly driven by the 81% contribution of pre-salt production in total oil and gas volumes. This highlights the importance of this segment in Petrobras’s operations.
Moreover, the Marechal Duque de Caxias system, with a capacity of producing 180,000 barrels of oil and 12 million cubic meters of gas per day, has positioned the company well for future output increases. Additionally, the anticipated arrival of the FPSO Maria Quiteria is expected to further enhance production capabilities in the Jubarte field.
Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR)’s strong operational efficiency is evidenced by a refining utilization rate of 91%, allowing it to capitalize on market demand for diesel and gasoline. Moreover, the company expects to begin operating its ROTA 3 gas pipeline in Q3 2024, increasing the supply of pre-salt gas to the domestic market. As a result, it will reduce its reliance on imports and bolster energy security.
However, Petróleo Brasileiro S.A. – Petrobras (NYSE:PBR) also faced several challenges particularly due to currency depreciation. The 11% depreciation of the Brazilian real against the U.S. dollar resulted in a negative accounting impact of $2.3 billion due to dollar-denominated obligations. Additionally, a $2.1 billion tax settlement contributed to a $300 million loss for the quarter.
Despite these challenges, the company plans to allocate between $13.5 billion and $14.5 billion for investments in 2024. It also plans to expand operations in Brazil’s equatorial region and the Pelotas Basin. Given PBR’s commitment to expand further, its share price increased by nearly 8% in the last three months. Moreover, 31 hedge funds tracked by Insider Monkey have collectively invested $3.7 billion in the company as of Q2 2024, earning PBR a place on our list of the best energy stocks to buy.
4. Patterson-UTI Energy, Inc. (NASDAQ:PTEN)
Number of Hedge Funds Holders: 32
Share Price: $8.37
Patterson-UTI Energy, Inc. (NASDAQ:PTEN) provides contract drilling services to oil and gas operators across the U.S. and internationally. The company offers a range of services from onshore drilling and hydraulic fracturing to advanced data analytics for well optimization. It operates through three segments: Drilling, Completion, and Drilling Products.
Patterson-UTI Energy, Inc. (NASDAQ:PTEN) reported revenue of $1.348 billion and net income of $11 million in Q2 2024. Adjusted EBITDA for the quarter reached $324 million, excluding $11 million in merger/acquisition expenses related to the NexTier merger and Ulterra acquisition. Moreover, the company also returned $164 million to shareholders in the quarter through dividends and share repurchases. This was in line with Patterson’s capital allocation strategy, under which it aims to return $400 million to shareholders in 2024.
The company’s drilling segment performed strongly with a quarterly revenue of $440 million and gross profit of $179 million. It operated with an average revenue per day of $36,430, representing a slight increase from the previous quarter. As of Q2 end, the company’s contract backlog stands at $433 million for U.S. drilling rigs, with steady demand expected through the end of 2024. Overall, activity in natural gas basins showed slight improvement, while activity in oil basins remained stable.
The company’s integrated drilling and completion services have been well-received, with new contracts signaling long-term growth. Moreover, Patterson-UTI Energy, Inc.’s (NASDAQ:PTEN) natural gas fueling business delivered over 100 million diesel gallon equivalents, further boosting its leadership in the natural gas-powered equipment sector.
However, the company faced challenges from constrained natural gas takeaways in West Texas and New Mexico, leading Patterson to reduce activity in those regions. Moreover, disruptions from M&A activity also impacted the operations. The company’s share price declined by more than 30% over the past six months.
Despite that, Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is optimistic about capital-efficient growth opportunities in international markets, such as the Middle East and offshore regions. Meanwhile, the Drilling Products segment has been gaining market share in the Ulterra division.
At the end of Q2 2024, 32 hedge funds have collectively invested $395 million in the company, according to Insider Monkey’s database. As a result, PTEN makes it to our list of the best energy stocks under $20 to buy.
3. Transocean Ltd. (NYSE:RIG)
Number of Hedge Funds Holders: 42
Share Price: $4.54
Transocean Ltd. (NYSE:RIG) is a leader in offshore drilling services, providing rigs, mobile units, and equipment to drill oil and gas wells worldwide. It operates a fleet of offshore drilling units, including ultra-deep and harsh environmental floaters, serving both integrated energy entities and government-owned companies.
Transocean Ltd. (NYSE:RIG) reported revenue of $861 million for Q2 2024, resulting in an adjusted EBITDA of $284 million. It delivered EBITDA margins of 33% for the quarter. The company posted a loss of $123 million, or $0.15 per share, for the quarter, due to delays in transitioning the Deepwater Atlas (Transocean’s drillship) to its higher 20K PSI (pounds per square inch) day rate and the delayed start of the KG1 in India, both of which negatively affected revenue. However, Transocean achieved 97% revenue efficiency for the quarter, attributed to strong fleet management, despite the challenges of mobilizing 40% of its fleet across multiple jurisdictions worldwide.
Furthermore, the company secured several new high-value contracts in the quarter, which bolsters growth prospects. Beacon Offshore awarded the Deepwater Atlas a two-well contract with a leading rate of $580,000 per day. This was further enhanced by a rate of $650,000 per day for advanced 20,000 PSI completions. In another milestone, BP signed a 3-year contract for Transocean’s Deepwater Invictus at $485,000 per day. These deals not only increase the contract backlog but also fill critical gaps in the company’s schedule, particularly in the U.S. Gulf region.
Despite securing new contracts, Transocean Ltd. (NYSE:RIG) faced operational challenges, such as delays in Deepwater Atlas transitioning to a high rate of 20k psi operations. This affected the company’s contracted revenues for the quarter. Moreover, a customer delay in the KG1 rig in India further reduced revenue. Thus, the company’s share price declined by 10% over the past month.
However, Transocean Ltd. (NYSE:RIG) countered these issues by commencing the Deepwater Aquila contract in Brazil to mitigate these setbacks. The company is also optimistic about its offshore drilling with contracts in Brazil and West Africa.
As of Q2 2024, 42 hedge funds have collectively invested $490 million in the company, according to Insider Monkey’s database, placing it on our list of the best energy stocks to buy.
2. Cenovus Energy Inc. (NYSE:CVE)
Number of Hedge Funds Holders: 46
Share Price: $17.11
Cenovus Energy Inc. (NYSE:CVE) is an integrated oil and gas company engaged in the exploration, production, refining, and marketing of crude oil, natural gas, and other petroleum products. It is a key player in the energy sector, operating across the segments of oil sands, conventional resources, and offshore drilling in Canada and the United States. The company’s diverse portfolio includes the Christina Lake, Foster Creek, and Sunrise projects.
Cenovus Energy Inc. (NYSE:CVE) reported an operating margin of $2.9 billion in Q2 2024, primarily driven by higher oil prices and strong oil production. The adjusted funds flow reached $2.4 billion, while the free funds flow reached $1.2 billion for the quarter. This allowed the company to invest $1 billion in dividend payments and share buybacks during the quarter.
It produced 610,000 barrels per day (bpd) from its oil sands assets, generating an operating margin of $2.7 billion, up by $500 million from the previous quarter. This increase is attributed to effective cost control and stable production.
However, earnings per share (EPS) for the quarter stood at $0.53, down by $0.90 per share. The company faced some operational hurdles during Q2; particularly, wildfires across Northern Alberta forced it to reduce staffing. Additionally, the planned production at Christina Lake and the Lloydminster upgrade experienced some production downtime. Moreover, the Christina Lake turnaround is also expected to reduce third-quarter production by 45,000 bpd. Therefore, the stock has declined by nearly 14% over the past month.
Despite the challenges, Cenovus Energy Inc. (NSYE:CVE) delivered significant progress in its key oil sands growth projects. The Narrows Lake tie-back to Christina Lake is 88% complete with the first oil from the Narrows Lake anticipated by mid-2025. Moreover, Sunrise is progressing well with two new pads expected to come online by early 2025.
Given the growth prospects, 46 hedge funds have collectively invested $1.2 billion in the company as of Q2 2024, according to Insider Monkey’s database. Thus, CVE makes it to our list of the best energy stocks under $20 to buy.
1. Southwestern Energy Company (NYSE:SWN)
Number of Hedge Funds Holders: 49
Share Price: $6.72
Southwestern Energy Company (NYSE:SWN) is an energy firm that explores and produces natural gas, oil, and natural gas liquids in the U.S. The company operates through two segments: Exploration and Production and Marketing. It also develops unconventional reservoirs in Pennsylvania, Ohio, and West Virginia.
Southwestern Energy Company (NYSE:SWN) reported a net loss of $608 million in Q2 2024, down substantially from a net income of $231 million in Q2 2023. The company’s adjusted net income was $113 million after accounting for the impact of several one-time items and a cost ceiling test impairment. While adjusted net income improved, adjusted EBITDA declined from $484 million to $413 million year-over-year.
Southwestern Energy Company produced a total of 379 Bcfe (Billion cubic feet equivalent) with an average production of 4.2 Bcfe per day during the quarter. However, the average price declined from $1.84 to $1.70 per Mcfe (thousand cubic feet equivalent) on a year-over-year basis, due to the impact of fluctuating commodity prices.
The company invested $430 million in capital projects during the quarter. It completed 22 wells, 19 in Appalachia and 3 in Haynesville. Moreover, the company optimized its production capabilities to align with fluctuating commodity prices.
Southwestern Energy Company (NYSE:SWN) announced a merger with Chesapeake Energy in a $7.4 billion deal. The merger is expected to be completed by the first week of October. Following the completion, the combined value of the new company is expected to be $24 billion, with Southwestern shareholders owning 40% of the company. Upon completion of the deal, the merged entity will be the largest natural gas producer in the U.S.
However, the company’s debt stood at $4.2 billion, with a net debt-to-adjusted EBITDA ratio of 2.1 times. This reflects significant financial pressure on the company due to its high leverage. Thus, investors must monitor how the company’s debt position works out following the merger. The stock has surged by nearly 7% in the past month.
As of Q2 2024, 49 hedge funds have collectively invested $941 million in the company, according to Insider Monkey’s database, placing it on our list of the best energy stocks to buy.
SWN is the best oil stock to buy under $20. While we acknowledge the potential of SWN as an investment, 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 SWN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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