Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 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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5 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 5 undervalued stocks in the Oil & Gas - Exploration and Production industry for Thursday, February 01, 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.

Epsilon Energy Ltd’s Value Grade

Value Grade:

Epsilon Energy Ltd. is an onshore natural gas production and midstream company with a focus on the Marcellus Shale of Pennsylvania. The Company is engaged in the acquisition, development, gathering and production of natural gas and oil reserves. The Company operates through three segments: Upstream, Gathering System, and Corporate. The Upstream segment's activities include acquisition, exploration, development and production of oil and natural gas reserves on properties within the United States. The Gathering System segment partners with two other companies to operate a natural gas gathering system. The Company has natural gas production in the Marcellus Shale in Pennsylvania, and oil, natural gas liquids and natural gas production in the Anadarko Basin in Oklahoma. The Company's subsidiaries include Epsilon Energy USA Inc., Epsilon Midstream, LLC, Epsilon Operating, LLC, Dewey Energy GP LLC, Dewey Energy Holdings, LLC, and Altolisa Holdings, LLC.

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.

Epsilon Energy Ltd has a Value Score of 86, which is considered to be undervalued.

When you look at Epsilon Energy Ltd’s price-to-sales ratio at 3.02 compared to the industry median at 1.76, this company has a higher price relative to revenue compared to its peers. This could make Epsilon Energy Ltd’s stock less attractive for value investors.

Epsilon Energy Ltd’s price-earnings ratio is 8.58 compared to the industry median at 7.18. This means it has a higher share price relative to earnings compared to its peers. This could make Epsilon Energy Ltd less attractive for value investors.

Now, let’s assess Epsilon Energy Ltd’s EV/EBITDA ratio, also known as enterprise multiple. At 4.9, when compared to the industry median of 4.5, the company may be considered overvalued 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. Epsilon Energy Ltd’s shareholder yield is higher than its industry median ratio of 1.33%. 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. Epsilon Energy Ltd’s price-to-book ratio is lower than its industry median ratio of 1.22. This could make Epsilon Energy Ltd more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Epsilon Energy Ltd’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Epsilon Energy Ltd’s price-to-free-cash-flow ratio is lower than its industry median ratio of 7.60. This could make Epsilon Energy Ltd more attractive because the lower P/FCF ratio indicates that Epsilon Energy Ltd 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.

Northern Oil and Gas Inc’s Value Grade

Value Grade:

Northern Oil and Gas, Inc. is an independent energy company. The Company is engaged in the acquisition, exploration, exploitation, development and production of crude oil and natural gas properties in the United States, primarily in the Williston Basin, the Appalachian Basin, and the Permian Basin. Its primary focus is investing in non-operated minority working and mineral interests in oil and gas properties, with a core area of focus in three basins within the United States. It primarily engages in oil and natural gas exploration and production by participating on a proportionate basis alongside third-party interests in wells drilled and completed in spacing units that include its acreage. The Company also holds a 30% interest in Forge Energy II Delaware, LLC, (Forge Assets). Forge Assets are primarily located in Ward and Reeves Counties, Texas and include approximately 10,200 net acres, 30.5 net producing wells, 2.3 net wells-in-process and 20 low-breakeven net undeveloped locations.

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.

Northern Oil and Gas Inc has a Value Score of 70, which is considered to be undervalued.

Northern Oil and Gas Inc’s price-earnings ratio is 4.3 compared to the industry median at 7.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Northern Oil and Gas Inc more attractive for value investors.

Northern Oil and Gas Inc’s price-to-book ratio is lower than its peers. This could make Northern Oil and Gas Inc more attractive for value investors when compared to the industry median at 1.22.

You can read more about Northern Oil and Gas 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.

Pedevco Corp’s Value Grade

Value Grade:

PEDEVCO Corp. is an oil and gas company focused on the acquisition and development of oil and natural gas assets. The Company's properties are located in the San Andres formation of the Permian Basin situated in West Texas and eastern New Mexico (the Permian Basin) and in the Denver-Julesberg Basin (D-J Basin) in Colorado. The Company holds approximately 32,870 net Permian Basin acres located in Chaves and Roosevelt Counties, New Mexico, through its wholly owned operating subsidiary, Pacific Energy Development Corp. (PEDCO), which is referred to as Permian Basin Asset and approximately 11,580 net D-J Basin acres located in Weld and Morgan Counties, Colorado, through its wholly owned operating subsidiary, Red Hawk Petroleum, LLC (Red Hawk), which is referred to as D-J Basin Asset. It holds interests in 381 gross (377 net) wells in its Permian Basin Asset of which 42 are active producers, 16 are active injectors and two are active saltwater disposal wells, all of which are held by PEDCO.

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.

Pedevco Corp has a Value Score of 64, which is considered to be undervalued.

Pedevco Corp’s price-earnings ratio is 40.4 compared to the industry median at 7.2. This means that it has a higher price relative to its earnings compared to its peers. This makes Pedevco Corp less attractive for value investors.

Pedevco Corp’s price-to-book ratio is higher than its peers. This could make Pedevco Corp less attractive for value investors when compared to the industry median at 1.22.

You can read more about Pedevco 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.

Ring Energy Inc’s Value Grade

Value Grade:

Ring Energy, Inc. is an independent exploration and production company based in The Woodlands, Texas. The Company is engaged in oil and natural gas development, production, acquisition, and exploration activities focused on Texas and New Mexico. Its primary drilling operations target the oil and liquids-rich producing formations in the Northwest Shelf, the Central Basin Platform, and the Delaware Basin, all of which are part of the Permian Basin in Texas and New Mexico. Its leasehold acreage positions totaled approximately 124,217 gross (102,175 net) acres, and it holds interests in approximately 1,056 gross (888 net) producing wells. Its proved reserves are oil-weighted with approximately 64% consisting of oil, 19% consisting of natural gas, and 17% consisting of natural gas liquids. Of those reserves, approximately 65% are classified as proved developed and 35% are classified as proved undeveloped. Its proved reserves are approximately 138.1 million barrels of oil equivalent (BOE).

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.

Ring Energy Inc has a Value Score of 92, which is considered to be undervalued.

Ring Energy Inc’s price-earnings ratio is 3.8 compared to the industry median at 7.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Ring Energy Inc more attractive for value investors.

Ring Energy Inc’s price-to-book ratio is higher than its peers. This could make Ring Energy Inc less attractive for value investors when compared to the industry median at 1.22.

You can read more about Ring Energy 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.

Riley Exploration Permian Inc’s Value Grade

Value Grade:

Riley Exploration Permian, Inc. is an independent oil and natural gas company. The Company is focused on the acquisition, exploration, development and production of oil, natural gas, and natural gas liquids (NGLs) in Texas and New Mexico. The Company is engaged in exploring its assets in the Permian Basin. The Company?s activities are primarily focused on the San Andres Formation, a conventional shelf margin deposit on the Central Basin Platform and Northwest Shelf. Its acreage is primarily located on contiguous blocks in Yoakum County, Texas, and Lea and Roosevelt Counties, New Mexico. The Company operates approximately 30,470 net acres and a total of 100 net producing wells.

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.

Riley Exploration Permian Inc has a Value Score of 95, which is considered to be undervalued.

Riley Exploration Permian Inc’s price-earnings ratio is 4.4 compared to the industry median at 7.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Riley Exploration Permian Inc more attractive for value investors.

Riley Exploration Permian Inc’s price-to-book ratio is higher than its peers. This could make Riley Exploration Permian Inc less attractive for value investors when compared to the industry median at 1.22.

You can read more about Riley Exploration Permian 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 5 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.

• Epsilon Energy Ltd stock has a Value Grade of A.
• Northern Oil and Gas Inc stock has a Value Grade of B.
• Pedevco Corp stock has a Value Grade of B.
• Ring Energy Inc stock has a Value Grade of A.
• Riley Exploration Permian Inc stock has a Value Grade of A.

Now that you have a bit more background about each of the 5 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.

• 5 Undervalued Oil & Gas - Exploration and Production Stocks for Thursday, February 01
• 6 Undervalued Oil & Gas - Exploration and Production Stocks for Wednesday, January 31
• What You Need to Know About Hess Corp's Q4 Earnings
• Why Crescent Energy Co’s (CRGY) Stock Is Down 4.66%

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