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.

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, February 23, 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.

Devon Energy Corp’s Value Grade

Value Grade:

Devon Energy Corporation is an independent energy company. The Company is engaged primarily in the exploration, development and production of oil, natural gas and natural gas and natural gas liquids. The Company?s oil and gas properties include the Delaware Basin, Anadarko Basin, Williston Basin, Eagle Ford, and Powder River Basin. The Delaware Basin operates approximately 16 rigs that offer exploration and development opportunities from geologic reservoirs, including the Wolfcamp, Bone Spring, Avalon, and Delaware formations. The Company's Anadarko Basin is located primarily in Oklahoma?s Canadian, Kingfisher and Blaine counties. It operates approximately four rig programs associated with this joint venture. The Williston Basin is located on the Fort Berthold Indian Reservation in North Dakota, and its operations are focused on the oil-prone Bakken and Three Forks formations. The Eagle Ford operations are located in Texas DeWitt and Karnes counties.

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.

Devon Energy Corp has a Value Score of 85, which is considered to be undervalued.

When you look at Devon Energy Corp’s price-to-sales ratio at 1.82 compared to the industry median at 1.96, this company has a lower price relative to revenue compared to its peers. This could make Devon Energy Corp’s stock more attractive for value investors.

Devon Energy Corp’s price-earnings ratio is 7.47 compared to the industry median at 7.53. This means it has a lower share price relative to earnings compared to its peers. This could make Devon Energy Corp more attractive for value investors.

Now, let’s assess Devon Energy Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 4.8, when compared to the industry median of 4.6, 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. Devon Energy Corp’s shareholder yield is higher than its industry median ratio of 2.03%. 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. Devon Energy Corp’s price-to-book ratio is higher than its industry median ratio of 1.28. This could make Devon Energy Corp less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Devon Energy Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Devon Energy Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 8.30. This could make Devon Energy Corp more attractive because the lower P/FCF ratio indicates that Devon Energy 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.

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.

Epsilon Energy Ltd’s price-earnings ratio is 8.5 compared to the industry median at 7.5. This means that it has a higher price relative to its earnings compared to its peers. This makes Epsilon Energy Ltd less attractive for value investors.

Epsilon Energy Ltd’s price-to-book ratio is higher than its peers. This could make Epsilon Energy Ltd less attractive for value investors when compared to the industry median at 1.28.

You can read more about Epsilon Energy Ltd’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.

Diamondback Energy Inc’s Value Grade

Value Grade:

Diamondback Energy, Inc. is an independent oil and gas company, which is focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. The Company operates through upstream segment, which is engaged in the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas. The midstream operations are focused on owning, operating, developing and acquiring midstream infrastructure assets in the Midland and Delaware Basins of the Permian Basin. Its total acreage position in the Permian Basin is approximately 508,767 net acres, which consisted primarily of approximately 325,540 acres in the Midland Basin and approximately 150,719 acres in the Delaware Basin. The Company?s subsidiaries include Diamondback E&P; LLC, Viper Energy Partners GP LLC, Rattler Midstream GP LLC, and QEP Resources, Inc.

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.

Diamondback Energy Inc has a Value Score of 67, which is considered to be undervalued.

Diamondback Energy Inc’s price-earnings ratio is 10.0 compared to the industry median at 7.5. This means that it has a higher price relative to its earnings compared to its peers. This makes Diamondback Energy Inc less attractive for value investors.

Diamondback Energy Inc’s price-to-book ratio is lower than its peers. This could make Diamondback Energy Inc more attractive for value investors when compared to the industry median at 1.28.

You can read more about Diamondback 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.

Matador Resources Co’s Value Grade

Value Grade:

Matador Resources Company is an independent energy company. The Company is engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. The Company operates through two business segments: exploration and production and midstream. The exploration and production segment is engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States and is focused primarily on the oil and liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. The midstream segment conducts midstream operations in support of its exploration, development and production operations and provides natural gas processing, oil transportation services, oil, natural gas and produced water gathering services and produced water disposal services to third parties.

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.

Matador Resources Co has a Value Score of 73, which is considered to be undervalued.

Matador Resources Co’s price-earnings ratio is 8.6 compared to the industry median at 7.5. This means that it has a higher price relative to its earnings compared to its peers. This makes Matador Resources Co less attractive for value investors.

Matador Resources Co’s price-to-book ratio is lower than its peers. This could make Matador Resources Co more attractive for value investors when compared to the industry median at 1.28.

You can read more about Matador Resources Co’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.

Mexco Energy Corp’s Value Grade

Value Grade:

Mexco Energy Corporation, through its subsidiaries, are engaged in the acquisition, exploration, development and production of crude oil, natural gas, condensate and natural gas liquids (NGLs). The Company owns producing properties and undeveloped acreage in approximately 14 states. It acquires interests in producing and non-producing oil and gas leases from landowners and leaseholders in areas considered favorable for oil and gas exploration, development, and production. There are two primary areas in which the Company is focused, namely the Delaware Basin located in the Western portion of the Permian Basin including Lea and Eddy Counties, New Mexico and Reeves and Loving Counties, Texas and the Midland Basin located in the Eastern portion of the Permian Basin, including Reagan, Upton, Midland, Martin, Howard and Glasscock Counties, Texas. The Company's subsidiaries include Forman Energy Corporation, Southwest Texas Disposal Corporation, and TBO Oil & Gas, 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.

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

Mexco Energy Corp’s price-earnings ratio is 10.8 compared to the industry median at 7.5. This means that it has a higher price relative to its earnings compared to its peers. This makes Mexco Energy Corp less attractive for value investors.

Mexco Energy Corp’s price-to-book ratio is higher than its peers. This could make Mexco Energy Corp less attractive for value investors when compared to the industry median at 1.28.

You can read more about Mexco Energy 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.

Reserve Petroleum Co’s Value Grade

Value Grade:

The Reserve Petroleum Company is an independent oil and gas company. The Company is engaged in oil and natural gas exploration, development and minerals management with areas of concentration in Arkansas, Kansas, Oklahoma, South Dakota, Texas and Wyoming. Its principal properties are oil and natural gas properties. It has interests in approximately 860 producing properties with 69% of them being working interest properties and the remaining 31% being royalty interest properties. It owns non-producing mineral interests in 256,534 gross acres equivalent to 88,214 net acres. These mineral interests are in ten different states in the north and south-central United States. A total of 81,080 (92%) net acres are in the states of Arkansas, Kansas, Oklahoma, South Dakota, Texas and Wyoming, the areas of concentration for the Company in its exploration and development programs. Its subsidiaries consist of majority owned Grand Woods Development, LLC and wholly owned Trinity Water Services, 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.

Reserve Petroleum Co has a Value Score of 68, which is considered to be undervalued.

Reserve Petroleum Co’s price-earnings ratio is 13.8 compared to the industry median at 7.5. This means that it has a higher price relative to its earnings compared to its peers. This makes Reserve Petroleum Co less attractive for value investors.

Reserve Petroleum Co’s price-to-book ratio is higher than its peers. This could make Reserve Petroleum Co less attractive for value investors when compared to the industry median at 1.28.

You can read more about Reserve Petroleum Co’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.

W&T; Offshore, Inc.’s Value Grade

Value Grade:

W&T; Offshore, Inc. is an independent oil and natural gas producer. The Company is engaged in the exploration, development and acquisition of oil and natural gas properties in the Gulf of Mexico. It has a working interest in over 54 offshore producing fields in federal and state waters (which include 45 fields in federal waters and nine in state waters). The Company has under lease approximately 602,100 gross acres (446,800 net acres) spanning across the outer continental shelf off the coasts of Louisiana, Texas, Mississippi and Alabama, with approximately 440,600 gross acres on the conventional shelf, approximately 153,500 gross acres in the deepwater and 8,000 gross acres in Alabama onshore. The Company's wholly owned subsidiaries consists of Aquasition Energy, LLC, Aquasition, LLC, Aquasition II, LLC, Aquasition III, LLC, Aquasition IV, LLC, Aquasition V, LLC, Green Hell, LLC, Seaquester, LLC, Seaquestration, LLC, and W & T Energy VI, 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.

W&T; Offshore, Inc. has a Value Score of 68, which is considered to be undervalued.

W&T; Offshore, Inc.’s price-earnings ratio is 7.5 compared to the industry median at 7.5. This means that it has a higher price relative to its earnings compared to its peers. This makes W&T; Offshore, Inc. fairly attractive for value investors.

W&T; Offshore, Inc.’s price-to-book ratio is lower than its peers. This could make W&T; Offshore, Inc. more attractive for value investors when compared to the industry median at 1.28.

You can read more about W&T; Offshore, 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.

• Devon Energy Corp stock has a Value Grade of A.
• Epsilon Energy Ltd stock has a Value Grade of A.
• Diamondback Energy Inc stock has a Value Grade of B.
• Matador Resources Co stock has a Value Grade of B.
• Mexco Energy Corp stock has a Value Grade of B.
• Reserve Petroleum Co stock has a Value Grade of B.
• W&T; Offshore, 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, February 23
• 7 Undervalued Oil & Gas - Exploration and Production Stocks for Thursday, February 22
• What You Need to Know About Coterra Energy Inc's Q4 Earnings
• What You Need to Know About Pioneer Natural Resources Co's Q4 Earnings

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