Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 7 stocks made the list for top value stocks in the Oil & Gas - Exploration and Production industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Latest Oil & Gas - Exploration and Production Stock News

Before choosing which top Oil & Gas - Exploration and Production stock to buy, be sure to conduct proper due diligence: analyze various financial metrics and look at historical data, public statements and news coverage.

The outlook for the oil and gas exploration and production sub-industry is mostly favorable for the foreseeable future. As a result of the COVID-19 pandemic, a major oil shock occurred in 2020. Since then, crude oil prices have begun to recover, currently priced at around $60 per barrel as a result of persistent supply cuts by the OPEC-Plus Consortium. While the demand perspective remains uncertain, from a supply perspective, both OPEC and non-OPEC participants have a conservative production outlook in 2021. The most significant unknown factor is the potential lifting of Iran sanctions by the Biden administration and its impact. According to the International Energy Agency (IEA), oil demand is expected to increase by about 5.4 mmb/d, to 96.4 mmb/d in 2021. While this appears to be a strong year-over-year increase, it is well in line with the 2019 demand of around 100 mmb/d, signifying only a 60% recovery from the pandemic. In May 2021, the EIA forecasted WTI crude oil prices as $59 dollars per barrel in 2021 and $57 per barrel in 2022. At these price points, exploration and production operations are expected to generate significant free cashflow.

Why Focus on Undervalued Oil & Gas - Exploration and Production Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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7 Undervalued Oil & Gas - Exploration and Production Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 7 undervalued stocks in the Oil & Gas - Exploration and Production industry for Friday, January 26, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Oil & Gas - Exploration and Production industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Ecopetrol SA (ADR)’s Value Grade

Value Grade:

Ecopetrol S.A. is an oil company. The Company operates in Colombia, Peru, Brazil and the United States Gulf Coast. The Company's segments include Exploration and Production, Transportation and Logistics, and Refining, Petrochemicals and Biofuels. The Company's Exploration and Production segment includes exploration, development and production activities in Colombia and abroad. The Company's Transportation and Logistics segment includes the transportation of crude oil, motor fuels, fuel oil and other refined products, including diesel and biofuels. The Company's main crude oil pipeline systems' operating capacity is approximately 1.34 million barrels per day (BPD). The Company's main refineries are the Barrancabermeja refinery, which it directly owns and operates, and a refinery in the Free Trade Zone in Cartagena that is operated by Reficar S.A., a subsidiary of the Company. The Company also owns and operates two other minor refineries: Orito and Apiay.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Ecopetrol SA (ADR) has a Value Score of 94, which is considered to be undervalued.

When you look at Ecopetrol SA (ADR)’s price-to-sales ratio at 0.65 compared to the industry median at 1.76, this company has a lower price relative to revenue compared to its peers. This could make Ecopetrol SA (ADR)’s stock more attractive for value investors.

Ecopetrol SA (ADR)’s price-earnings ratio is 4.45 compared to the industry median at 7.38. This means it has a lower share price relative to earnings compared to its peers. This could make Ecopetrol SA (ADR) more attractive for value investors.

Now, let’s assess Ecopetrol SA (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 3.6, when compared to the industry median of 4.5, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Ecopetrol SA (ADR)’s shareholder yield is higher than its industry median ratio of 1.38%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Ecopetrol SA (ADR)’s price-to-book ratio is lower than its industry median ratio of 1.24. This could make Ecopetrol SA (ADR) more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Ecopetrol SA (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Ecopetrol SA (ADR)’s price-to-free-cash-flow ratio is higher than its industry median ratio of 7.90. This could make Ecopetrol SA (ADR) less attractive because the higher P/FCF ratio indicates that Ecopetrol SA (ADR) is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

EOG Resources Inc’s Value Grade

Value Grade:

EOG Resources, Inc. (EOG) is an independent (non-integrated) crude oil and natural gas company. The Company is engaged in exploration, development, production and marketing crude oil, natural gas liquids (NGLs) and natural gas primarily in producing basins in the United States of America, The Republic of Trinidad and Tobago (Trinidad), the Sultanate of Oman and other international areas. Its operations are all crude oil, NGLs and natural gas exploration and production related. Its operations are focused on the productive basins in the United States with a focus on crude oil and, to a lesser extent, liquids-rich natural gas plays. The Company has operations in offshore Trinidad and Oman, as well as it is executing an abandonment and reclamation program in Canada.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

EOG Resources Inc has a Value Score of 71, which is considered to be undervalued.

EOG Resources Inc’s price-earnings ratio is 8.5 compared to the industry median at 7.4. This means that it has a higher price relative to its earnings compared to its peers. This makes EOG Resources Inc less attractive for value investors.

EOG Resources Inc’s price-to-book ratio is lower than its peers. This could make EOG Resources Inc more attractive for value investors when compared to the industry median at 1.24.

You can read more about EOG Resources Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

EQT Corp’s Value Grade

Value Grade:

EQT Corporation is a natural gas producer with operations focused on the Marcellus and Utica Shales of the Appalachian Basin. It has approximately 25.0 trillion cubic feet equivalents (Tcfe) of proved natural gas, natural gas liquids (NGLs), and crude oil reserves across approximately 2.0 million gross acres, including approximately 1.8 million gross acres in the Marcellus play. The Company is focused on the execution of combo-development projects, which refers to the development of several multi-well pads in tandem. It owns or leases approximately 610,000 net acres in Pennsylvania. The Company owns or leases approximately 405,000 net acres in West Virginia. It also owns or leases approximately 65,000 net acres in eastern Ohio. It primarily contracts with MarkWest Energy Partners, L.P. (MarkWest) to process its natural gas and extract from the produced natural gas heavier hydrocarbon streams consisting of ethane, propane, isobutane, normal butane and natural gasoline.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

EQT Corp has a Value Score of 80, which is considered to be undervalued.

EQT Corp’s price-earnings ratio is 5.5 compared to the industry median at 7.4. This means that it has a lower price relative to its earnings compared to its peers. This makes EQT Corp more attractive for value investors.

EQT Corp’s price-to-book ratio is higher than its peers. This could make EQT Corp less attractive for value investors when compared to the industry median at 1.24.

You can read more about EQT Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Gulf Coast Ultra Deep Royalty Trust’s Value Grade

Value Grade:

Gulf Coast Ultra Deep Royalty Trust (the Royalty Trust) is a statutory trust. The Company holds overriding royalty interest in future production from each of McMoRan's Inboard Lower Tertiary/Cretaceous exploration prospects located in the shallow waters of the Gulf of Mexico and onshore in South Louisiana. The Royalty Trust's reserve fund short-term investments include United States treasury securities. The Company's subject interests consist of approximately 20 specified Inboard Lower Tertiary/Cretaceous. The offshore subject interests consisted of exploration prospects, including Barataria, Barbosa, Blackbeard East, Blackbeard West, Blackbeard West, Bonnet, Calico Jack, Captain Blood, Davy Jones, Davy Jones West, Drake, England, Hook, Hurricane, Lafitte, Morgan, and Queen Anne's Revenge. The Company?s onshore subject interests consisted of Highlander, Lineham Creek, and Tortuga.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Gulf Coast Ultra Deep Royalty Trust has a Value Score of 73, which is considered to be undervalued.

Gulf Coast Ultra Deep Royalty Trust’s price-earnings ratio is 2.8 compared to the industry median at 7.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Gulf Coast Ultra Deep Royalty Trust more attractive for value investors.

Gulf Coast Ultra Deep Royalty Trust’s price-to-book ratio is lower than its peers. This could make Gulf Coast Ultra Deep Royalty Trust more attractive for value investors when compared to the industry median at 1.24.

You can read more about Gulf Coast Ultra Deep Royalty Trust’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Ovintiv Inc’s Value Grade

Value Grade:

Ovintiv Inc. is an oil and natural gas exploration and production company. The Company is focused on the development of its multi-basin portfolio of top tier oil and natural gas assets located in the United States and Canada. Its operations also include the marketing of oil, natural gas liquids (NGLs) and natural gas. The Company operates through three segments: USA Operations, Canadian Operations and Market Optimization. USA Operations segment includes the exploration for, development of, and production of oil, NGLs, natural gas and other related activities within the United States. Canadian Operations segment includes the exploration for, development of, and production of oil, NGLs, natural gas and other related activities within Canada. Market Optimization segment is primarily responsible for the sale of the Company’s production to third-party customers and enhancing the associated netback price. The segment’s activities also include third-party purchases and sales of products.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Ovintiv Inc has a Value Score of 77, which is considered to be undervalued.

Ovintiv Inc’s price-earnings ratio is 4.3 compared to the industry median at 7.4. This means that it has a lower price relative to its earnings compared to its peers. This makes Ovintiv Inc more attractive for value investors.

Ovintiv Inc’s price-to-book ratio is lower than its peers. This could make Ovintiv Inc fairly attractive for value investors when compared to the industry median at 1.24.

You can read more about Ovintiv Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

San Juan Basin Royalty Trust’s Value Grade

Value Grade:

San Juan Basin Royalty Trust (the Trust) is an express trust. The principal asset of the Trust is the Royalty, which consists of a 75% net overriding royalty interest that burdens the Subject Interests located in the San Juan Basin. PNC Bank acts as the trustee of the Trust. The primary function of the Trustee is to collect the Royalty Income, to pay all expenses and charges of the Trust and to distribute the remaining available income to the Unit Holders. The Trust is a widely held fixed investment trust (WHFIT) classified as a non-mortgage widely held fixed investment trust (NMWHFIT). The Trust?s reserves consisted of natural gas reserves, and proceeds from the subject interests, which were attributable to the production and sale of natural gas by Hilcorp, as well as other proceeds.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

San Juan Basin Royalty Trust has a Value Score of 69, which is considered to be undervalued.

San Juan Basin Royalty Trust’s price-earnings ratio is 3.1 compared to the industry median at 7.4. This means that it has a lower price relative to its earnings compared to its peers. This makes San Juan Basin Royalty Trust more attractive for value investors.

San Juan Basin Royalty Trust’s price-to-book ratio is lower than its peers. This could make San Juan Basin Royalty Trust more attractive for value investors when compared to the industry median at 1.24.

You can read more about San Juan Basin Royalty Trust’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Tellurian Inc’s Value Grade

Value Grade:

Tellurian Inc. is engaged in building a global natural gas business. The Company is engaged in developing and operating a portfolio of natural gas, liquefied natural gas (LNG) marketing, and infrastructure assets that includes an LNG terminal facility (the Driftwood terminal), an associated pipeline, other related pipelines, and upstream natural gas assets. The Company's segments include Upstream segment, Midstream segment, Marketing & Trading segment. The Upstream segment is organized and operates to produce, gather, and deliver natural gas and to acquire and develop natural gas assets. The Midstream segment is organized to develop, construct, and operate LNG terminals and pipelines. The Marketing & Trading segment is organized and operates to purchase and sell natural gas produced primarily by the Upstream segment, market the Driftwood terminal?s LNG production capacity and trade LNG.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Tellurian Inc has a Value Score of 63, which is considered to be undervalued.

Tellurian Inc’s price-to-book ratio is higher than its peers. This could make Tellurian Inc less attractive for value investors when compared to the industry median at 1.24.

You can read more about Tellurian Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Oil & Gas - Exploration and Production Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Oil & Gas - Exploration and Production stocks as well as other industrys.

Choosing Which of the 7 Best Oil & Gas - Exploration and Production Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Ecopetrol SA (ADR) stock has a Value Grade of A.
• EOG Resources Inc stock has a Value Grade of B.
• EQT Corp stock has a Value Grade of B.
• Gulf Coast Ultra Deep Royalty Trust stock has a Value Grade of B.
• Ovintiv Inc stock has a Value Grade of B.
• San Juan Basin Royalty Trust stock has a Value Grade of B.
• Tellurian Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 7 undervalued stocks in the Oil & Gas - Exploration and Production industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Oil & Gas - Exploration and Production Stocks

Want to learn more about Oil & Gas - Exploration and Production stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 7 Undervalued Oil & Gas - Exploration and Production Stocks for Friday, January 26
• 3 Undervalued Oil & Gas - Exploration and Production Stocks for Thursday, January 25
• What You Need to Know About CNX Resources Corp's Q4 Earnings
• What You Need to Know About Murphy Oil Corp's Q4 Earnings

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