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 Friday, September 06, 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.

Crescent Energy Co’s Value Grade

Value Grade:

Crescent Energy Company is an energy company. The Company’s operations are focused on Texas and the Rockies with active development in the Eagle Ford and Uinta basins. It also operates conventional assets in Wyoming, where it is active in carbon capture, use and storage (CCUS). It is an operator in the Eagle Ford with a proven ability to scale and safely capture operational upside. It operates in both the oil and condensate windows of the Eagle Ford. Its Uinta position has a large inventory of low-risk undeveloped locations with significant resource potential across multiple, prolific formations. The Uinta basin produces high-value crude, and it has secured takeaway capacity into the Salt Lake City refining complex. Its Wyoming operations comprise low-decline conventional production spanning numerous conventional fields. It operates two enhanced oil recovery projects (EOR) in Wyoming.

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.

Crescent Energy Co has a Value Score of 69, which is considered to be undervalued.

When you look at Crescent Energy Co’s price-to-sales ratio at 0.47 compared to the industry median at 2.04, this company has a lower price relative to revenue compared to its peers. This could make Crescent Energy Co’s stock more attractive for value investors.

Crescent Energy Co’s price-earnings ratio is 44.35 compared to the industry median at 11.26. This means it has a higher share price relative to earnings compared to its peers. This could make Crescent Energy Co less attractive for value investors.

Now, let’s assess Crescent Energy Co’s EV/EBITDA ratio, also known as enterprise multiple. At 3.4, when compared to the industry median of 5.2, 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. Crescent Energy Co’s shareholder yield is lower than its industry median ratio of 0.63%. 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. Crescent Energy Co’s price-to-book ratio is lower than its industry median ratio of 1.25. This could make Crescent Energy Co more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Crescent Energy Co’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Crescent Energy Co’s price-to-free-cash-flow ratio is lower than its industry median ratio of 6.68. This could make Crescent Energy Co more attractive because the lower P/FCF ratio indicates that Crescent Energy Co 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.

Mach Natural Resources LP’s Value Grade

Value Grade:

Mach Natural Resources LP is an independent upstream oil and gas company. The Company is focused on acquisition, development and production of oil, natural gas and NGL reserves in the Anadarko Basin region of Western Oklahoma, Southern Kansas, and the panhandle of Texas. The Company's assets are located throughout Western Oklahoma, Southern Kansas and the panhandle of Texas and consist of approximately 4,600 gross operated PDP wells. Additionally, it owns a portfolio of midstream assets which support its leases, including ownership in four processing plants with combined processing capacity of 353 million cubic feet per day (MMcf/d), along with 1,210 miles of gas gathering pipelines. Additionally, it owns water infrastructure consisting of 880 miles of gathering pipeline and 55 disposal 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.

Mach Natural Resources LP has a Value Score of 90, which is considered to be undervalued.

Mach Natural Resources LP’s price-earnings ratio is 6.9 compared to the industry median at 11.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Mach Natural Resources LP more attractive for value investors.

You can read more about Mach Natural Resources LP’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 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. It operates through two segments: exploration and production and midstream. The exploration and production segment are 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 the Company’s 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 79, which is considered to be undervalued.

Matador Resources Co’s price-earnings ratio is 6.6 compared to the industry median at 11.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Matador Resources Co more 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 1.25.

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.

Obsidian Energy Ltd’s Value Grade

Value Grade:

Obsidian Energy Ltd. is a Canada-based exploration and production company. The Company operates in one segment, to explore for, develop and hold interests in oil and natural gas properties and related production infrastructure in the Western Canada Sedimentary Basin directly and through investments in securities of subsidiaries holding such interests. It has a portfolio of assets producing around 35,700 barrels of oil equivalent (boe) per day. Its operating areas include Cardium, Peace River and Viking areas of Alberta. Its Cardium asset is a fully delineated and de-risked asset. It is focused on manufacturing repeatable low-decline and high-netback light-oil wells across its Cardium land base. The Viking is a light oil, horizontal development play located in central Alberta. Its operations are focused on the Esther area. Peace River is a stable, cold-flow, base production asset. It operates on a contiguous and an acreage within the heart of the Peace River Oilsands region.

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.

Obsidian Energy Ltd has a Value Score of 99, which is considered to be undervalued.

Obsidian Energy Ltd’s price-earnings ratio is 6.1 compared to the industry median at 11.3. This means that it has a lower price relative to its earnings compared to its peers. This makes Obsidian Energy Ltd more attractive for value investors.

Obsidian Energy Ltd’s price-to-book ratio is higher than its peers. This could make Obsidian Energy Ltd less attractive for value investors when compared to the industry median at 1.25.

You can read more about Obsidian 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.

TXO Partners LP’s Value Grade

Value Grade:

TXO Partners, L.P. is a master limited partnership focused on the acquisition, development, optimization and exploitation of conventional oil, natural gas, and natural gas liquid (NGL) reserves in North America. The Company’s acreage positions are concentrated in the Permian Basin of West Texas and New Mexico and the San Juan Basin of New Mexico and Colorado. Its assets consist of approximately 845,820 gross (371,796 net) leasehold and mineral acres located primarily in the Permian Basin and San Juan Basin. Its assets include a 50% interest in Cross Timbers Energy, LLC (Cross Timbers). As operator, it designs and manages the development, recompletion or workover for all of the wells it operates and supervises operation and maintenance activities on a day-to-day basis. It markets the majority of the natural gas, NGL, crude oil and condensate production from the properties on which it operates. It also markets products produced by third party working interest owners.

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.

TXO Partners LP has a Value Score of 63, which is considered to be undervalued.

TXO Partners LP’s price-to-book ratio is higher than its peers. This could make TXO Partners LP less attractive for value investors when compared to the industry median at 1.25.

You can read more about TXO Partners LP’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.

• Crescent Energy Co stock has a Value Grade of B.
• Mach Natural Resources LP stock has a Value Grade of A.
• Matador Resources Co stock has a Value Grade of B.
• Obsidian Energy Ltd stock has a Value Grade of A.
• TXO Partners LP stock has a Value Grade of B.

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 Friday, September 06
• 5 Undervalued Oil & Gas - Exploration and Production Stocks for Thursday, September 05
• 6 Undervalued Oil & Gas - Exploration and Production Stocks for Wednesday, September 04
• Why Highpeak Energy Inc’s (HPK) Stock Is Down 5.17%

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