Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 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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6 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 6 undervalued stocks in the Oil & Gas - Exploration and Production industry for Monday, August 12, 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.

Battalion Oil Corp’s Value Grade

Value Grade:

Battalion Oil Corporation is an independent energy company. It is focused on the acquisition, production, exploration and development of onshore liquids-rich oil and natural gas assets in the United States. Its properties and drilling activities are focused on the Delaware Basin. Its principal properties consist of leasehold interests in developed and undeveloped oil and natural gas properties and the reserves associated with these properties. Its working interests in over 39,867 net acres in the Delaware Basin are in Pecos, Reeves, Ward and Winkler Counties, Texas. This resource play is characterized by high oil and liquids-rich natural gas content in thick, continuous sections of source rock that can provide repeatable drilling opportunities and significant initial production rates. Its primary targets in this area are the Wolfcamp and Bone Spring formations. It has over 90 operated wells producing in this area in addition to minor working interests in 19 non-operated 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.

Battalion Oil Corp has a Value Score of 77, which is considered to be undervalued.

When you look at Battalion Oil Corp’s price-to-sales ratio at 0.26 compared to the industry median at 2.05, this company has a lower price relative to revenue compared to its peers. This could make Battalion Oil Corp’s stock more attractive for value investors.

Now, let’s assess Battalion Oil Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 6.0, when compared to the industry median of 5.3, 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. Battalion Oil Corp’s shareholder yield is lower than its industry median ratio of 0.33%. 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. Battalion Oil Corp’s price-to-book ratio is higher than its industry median ratio of 1.36. This could make Battalion Oil Corp less attractive to investors looking for a new addition to their portfolio.

Diamondback Energy Inc’s Value Grade

Value Grade:

Diamondback Energy, Inc. is an independent oil and natural gas company focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves primarily in the Permian Basin in West Texas. The Company's activities are primarily focused on horizontal development of the Spraberry and Wolfcamp formations of the Midland Basin and the Wolfcamp and Bone Spring formations of the Delaware Basin, both of which are part of the larger Permian Basin in West Texas and New Mexico. Its total acreage position in the Permian Basin includes approximately 607,877 gross (493,769 net) acres, which consists primarily of 428,324 gross (349,707 net) acres in the Midland Basin and 174,828 gross (143,742 net) acres in the Delaware Basin. The Company is also engaged in midstream gathering, compression, water handling, disposal and treatment operations. Its subsidiary Viper Energy, Inc., also owns mineral interests in the Permian Basin.

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 72, which is considered to be undervalued.

Diamondback Energy Inc’s price-earnings ratio is 10.3 compared to the industry median at 10.3. This means that it has a higher price relative to its earnings compared to its peers. This makes Diamondback Energy Inc fairly 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 1.36.

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.

Gulfport Energy Corp’s Value Grade

Value Grade:

Gulfport Energy Corporation is an independent natural gas-weighted exploration and production company. It is focused on the exploration, acquisition and production of natural gas, crude oil, and natural gas liquid (NGL) in the United States with primary focus on the Appalachia and Anadarko basins. Its principal properties are located in eastern Ohio targeting the Utica and Marcellus formations and in central Oklahoma targeting the SCOOP Woodford and SCOOP Springer formations. The Utica covers hydrocarbon-bearing rock formations located in the Appalachian Basin of the United States and Canada. It has about 193,000 net reservoir acres located primarily in Belmont, Harrison, Jefferson and Monroe Counties in eastern Ohio where the Utica ranges in thickness from 600 to over 750 feet. The SCOOP play mainly targets the Devonian to Mississippian aged Woodford, Sycamore and Springer formations. It has about 73,000 net reservoir acres, located primarily in Garvin, Grady and Stephens 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.

Gulfport Energy Corp has a Value Score of 88, which is considered to be undervalued.

Gulfport Energy Corp’s price-earnings ratio is 3.1 compared to the industry median at 10.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Gulfport Energy Corp more attractive for value investors.

Gulfport Energy Corp’s price-to-book ratio is higher than its peers. This could make Gulfport Energy Corp less attractive for value investors when compared to the industry median at 1.36.

You can read more about Gulfport 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.

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. Its segments include 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 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 product to provide operational flexibility.

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 78, which is considered to be undervalued.

Ovintiv Inc’s price-earnings ratio is 6.0 compared to the industry median at 10.3. 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 higher than its peers. This could make Ovintiv Inc less attractive for value investors when compared to the industry median at 1.36.

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.

Ring Energy Inc’s Value Grade

Value Grade:

Ring Energy, Inc. is an oil and gas exploration, development, and production company. The Company is focused on the development of its Permian Basin assets. Its primary drilling operations target the oil and liquids-rich producing formations in the Northwest Shelf and the Central Basin Platform, in the Permian Basin in Texas. The Company's leasehold acreage positions total approximately 96,127 gross (80,535 net) acres, and it holds interests in approximately 1,043 gross (864 net) producing wells. All of its properties are located in the Permian Basin and its proved reserves are oil-weighted, with approximately 63% consisting of oil, 19% consisting of natural gas, and 18% consisting of natural gas liquids. Of those reserves, approximately 68% are classified as proved developed and 32% are classified as proved undeveloped. Its proved reserves are approximately 129.8 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 95, which is considered to be undervalued.

Ring Energy Inc’s price-earnings ratio is 4.9 compared to the industry median at 10.3. 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 1.36.

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.

US Energy Corp’s Value Grade

Value Grade:

U.S. Energy Corp. is an independent energy company. The Company is focused on the acquisition and development of oil and gas producing properties primarily in the United States. The Company’s principal business activities are focused on the acquisition, exploration, and development of onshore oil and natural gas properties in the United States. Its principal properties and operations are in the Rockies region (Montana, Wyoming and North Dakota), the Mid-Continent (Oklahoma, Kansas and North and East Texas) region, and the West Texas, and Gulf Coast region. It also has assets comprising over 140,000 net acres targeting helium production across the Kevin Dome structure in Toole County, Montana.

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.

US Energy Corp has a Value Score of 70, which is considered to be undervalued.

US Energy Corp’s price-to-book ratio is higher than its peers. This could make US Energy Corp less attractive for value investors when compared to the industry median at 1.36.

You can read more about US 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.

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 6 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.

• Battalion Oil Corp stock has a Value Grade of B.
• Diamondback Energy Inc stock has a Value Grade of B.
• Gulfport Energy Corp stock has a Value Grade of A.
• Ovintiv Inc stock has a Value Grade of B.
• Ring Energy Inc stock has a Value Grade of A.
• US Energy Corp stock has a Value Grade of B.

Now that you have a bit more background about each of the 6 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.

• 6 Undervalued Oil & Gas - Exploration and Production Stocks for Monday, August 12
• 6 Undervalued Oil & Gas - Exploration and Production Stocks for Friday, August 09
• What You Need to Know About Berry Corporation (Bry)'s Q2 Earnings
• 5 Undervalued Oil & Gas - Exploration and Production Stocks for Thursday, August 08

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