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.

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 15, 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.

California Resources Corp’s Value Grade

Value Grade:

California Resources Corporation is an independent oil and natural gas exploration and production company with operating properties within California. The Company has the lowest carbon intensity production in the United States, which is focused on land, mineral and technical resources for decarbonization by developing carbon capture and storage (CCS) and other emissions-reducing projects. The CCS project at the Elk Hills Field is referred to as Carbon TerraVault I. These projects inject CO2 from industrial sources into depleted underground oil and gas reservoirs and permanently store CO2 deep underground. The Company has operations in oil and gas basins, including San Joaquin Basin, Los Angeles Basin, and Sacramento Basin. San Joaquin Basin operates and develops approximately 42 fields and holds approximately 1.24 million net mineral acres in the San Joaquin Basin. Los Angeles Basin holds approximately 29,000 net mineral acres. Sacramento Basin operates approximately 50 fields.

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.

California Resources Corp has a Value Score of 86, which is considered to be undervalued.

When you look at California Resources Corp’s price-to-sales ratio at 1.31 compared to the industry median at 1.82, this company has a lower price relative to revenue compared to its peers. This could make California Resources Corp’s stock more attractive for value investors.

California Resources Corp’s price-earnings ratio is 8.42 compared to the industry median at 7.21. This means it has a higher share price relative to earnings compared to its peers. This could make California Resources Corp less attractive for value investors.

Now, let’s assess California Resources Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 4.5, 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. California Resources Corp’s shareholder yield is higher than its industry median ratio of 0.81%. 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. California Resources Corp’s price-to-book ratio is higher than its industry median ratio of 1.21. This could make California Resources Corp less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at California Resources Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. California Resources Corp’s price-to-free-cash-flow ratio is higher than its industry median ratio of 7.39. This could make California Resources Corp less attractive because the higher P/FCF ratio indicates that California Resources Corp 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.

Gran Tierra Energy Inc’s Value Grade

Value Grade:

Gran Tierra Energy Inc. is an independent international energy company. The Company is focused on international oil and natural gas exploration and production with assets in Colombia and Ecuador. The Company has interests in approximately 22 blocks in Colombia, three blocks in Ecuador, and is the operator of 24 of these blocks. Its assets in Colombia represent approximately 99% of its production with oil reserves and production mainly located in the Middle Magdalena Valley (MMV) and Putumayo Basin. In MMV, the Company’s field is the Acordionero field, where it produces approximately 17-degree American Petroleum Institute (API) oil, which represents 52% of total company production. The Putumayo production is approximately 27-degree API for Chaza Block and 18-degree API for Suoriente Block, representing 25% and 14% respectively, of total company production.

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.

Gran Tierra Energy Inc has a Value Score of 99, which is considered to be undervalued.

Gran Tierra Energy Inc’s price-earnings ratio is 7.2 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 Gran Tierra Energy Inc fairly attractive for value investors.

Gran Tierra Energy Inc’s price-to-book ratio is higher than its peers. This could make Gran Tierra Energy Inc less attractive for value investors when compared to the industry median at 1.21.

You can read more about Gran Tierra 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.

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 1.21.

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.

SilverBow Resources Inc’s Value Grade

Value Grade:

SilverBow Resources, Inc. is an energy company. The Company is engaged in the exploration, development and production of oil and gas assets in the Eagle Ford Shale and Austin Chalk in South Texas. It owns approximately 220,000 net acres across five operating areas. The Company designs and manages the development of a well and supervises operation and maintenance activities on a day-to-day basis. Its operating areas include Webb County Gas, Western Condensate, Southern Eagle Ford, Central Oil and Eastern Extension. It has a gas gathering agreements with Howard Energy Partners providing for the transportation of its Eagle Ford and Austin Chalk production on the pipeline from its Fasken, Rio Bravo, La Mesa and Northern Webb areas to the Kinder Morgan Texas Pipeline, Eagle Ford Midstream or Howard's Impulsora Pipeline. It has gas processing and gathering agreements with Targa Resources Corp. and DCP South Central Texas, LLC for a majority of its natural gas production in the AWP area.

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.

SilverBow Resources Inc has a Value Score of 94, which is considered to be undervalued.

SilverBow Resources Inc’s price-earnings ratio is 2.1 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 SilverBow Resources Inc more attractive for value investors.

SilverBow Resources Inc’s price-to-book ratio is higher than its peers. This could make SilverBow Resources Inc less attractive for value investors when compared to the industry median at 1.21.

You can read more about SilverBow 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.

SandRidge Energy Inc’s Value Grade

Value Grade:

SandRidge Energy, Inc. is an independent oil and natural gas company that is focused on the acquisition and development of oil and gas properties. The Company?s primary areas of operation are the Mid-Continent region in Oklahoma and Kansas. The Company holds interests in over 1,471 gross producing wells, approximately 992 of which it operates, and approximately 551,000 gross total acres under lease located primarily in Oklahoma and Kansas. Its productive wells consist of wells that are producing hydrocarbons. The Company sells its oil, natural gas and natural gas liquids (NGLs) to a range of customers, including oil and natural gas companies and trading and energy marketing companies. The Company?s subsidiaries include Lariat Services, Inc., SandRidge Exploration and Production, LLC, SandRidge Holdings, Inc., SandRidge Midstream, Inc., SandRidge Operating Company and SandRidge Realty, 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.

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

SandRidge Energy Inc’s price-earnings ratio is 2.8 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 SandRidge Energy Inc more attractive for value investors.

SandRidge Energy Inc’s price-to-book ratio is higher than its peers. This could make SandRidge Energy Inc less attractive for value investors when compared to the industry median at 1.21.

You can read more about SandRidge 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.

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.

• California Resources Corp stock has a Value Grade of A.
• Gran Tierra Energy Inc stock has a Value Grade of A.
• Northern Oil and Gas Inc stock has a Value Grade of B.
• SilverBow Resources Inc stock has a Value Grade of A.
• SandRidge Energy 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 15
• 4 Undervalued Oil & Gas - Exploration and Production Stocks for Wednesday, February 14
• What You Need to Know About Occidental Petroleum Corp's Q4 Earnings
• 4 Undervalued Oil & Gas - Exploration and Production Stocks for Tuesday, February 13

AAII Disclaimer

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