Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 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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3 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 3 undervalued stocks in the Oil & Gas - Exploration and Production industry for Monday, November 06, 2023. 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.

GeoPark Ltd’s Value Grade

Value Grade:

GeoPark Ltd is a Colombia-based company operating in the energy sector. As an oil and gas explorer, operator and consolidator the Company has assets and growth platforms in Colombia, Ecuador, Chile and Brazil. Working interests from operation in 42 hydrocarbon blocks comprise of natural gas exploration and production (E&P;) and crude oil production on land as well as offshore across over 700,000 acres. The Del Mosquito block in Argentina's Austral basin, and the Cerro Dona Juana and Loma Cortaderal blocks in the Neuquen basin are wholly owned by GeoPark Holdings Limited, while the Fell block in Chile's Magallanes region is 90% owned by the Company, with the remaining interest in associated infrastructure, production facilities, operating licenses and a technical database are held by state oil firm, Enap.

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.

GeoPark Ltd has a Value Score of 94, which is considered to be undervalued.

When you look at GeoPark Ltd’s price-to-sales ratio at 0.67 compared to the industry median at 1.96, this company has a lower price relative to revenue compared to its peers. This could make GeoPark Ltd’s stock more attractive for value investors.

GeoPark Ltd’s price-earnings ratio is 3.18 compared to the industry median at 6.68. This means it has a lower share price relative to earnings compared to its peers. This could make GeoPark Ltd more attractive for value investors.

Now, let’s assess GeoPark Ltd’s EV/EBITDA ratio, also known as enterprise multiple. At 2.2, when compared to the industry median of 4.2, 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. GeoPark Ltd’s shareholder yield is higher than its industry median ratio of 1.23%. 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. GeoPark Ltd’s price-to-book ratio is higher than its industry median ratio of 1.42. This could make GeoPark Ltd less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at GeoPark Ltd’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. GeoPark Ltd’s price-to-free-cash-flow ratio is lower than its industry median ratio of 7.38. This could make GeoPark Ltd more attractive because the lower P/FCF ratio indicates that GeoPark 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.

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. The Company operates through three segments: 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 related 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 products.

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 93, which is considered to be undervalued.

Ovintiv Inc’s price-earnings ratio is 3.7 compared to the industry median at 6.7. 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 1.42.

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.

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 82, which is considered to be undervalued.

Reserve Petroleum Co’s price-earnings ratio is 11.4 compared to the industry median at 6.7. 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 1.42.

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.

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 3 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.

• GeoPark Ltd stock has a Value Grade of A.
• Ovintiv Inc stock has a Value Grade of A.
• Reserve Petroleum Co stock has a Value Grade of A.

Now that you have a bit more background about each of the 3 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.

• 3 Undervalued Oil & Gas - Exploration and Production Stocks for Monday, November 06
• 5 Undervalued Oil & Gas - Exploration and Production Stocks for Friday, November 03
• Why Sabine Royalty Trust’s (SBR) Stock Is Up 5.41%
• 3 Undervalued Oil & Gas - Exploration and Production Stocks for Thursday, November 02

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