Hillcrest Energy Technologies. (CSE: HEAT)
From concept to commercialization, Hillcrest is investing in the development of energy solutions that will power a more sustainable and electrified future.
The US stock market’s energy sector offers many opportunities for value investors. Oil and gas stocks are flush with cash, actively paying down debt, and have favorable production outlooks. If oil prices rise, future earnings reports are sure to please investors. Additionally, Shell predicts that global demand for liquefied natural gas (LNG) will increase by over 40% by 2040, benefiting related LNG transport companies. Lastly, green energy transition companies usually have low market valuations, making them appealing to value investors.
Here are the 5 most undervalued energy stocks in the US market:
Independent energy company Devon Energy Corp (NYSE:DVN) focuses on the exploration, development, and production of oil and gas. 60% of the company’s oil assets are located in the Delaware Basin, and these assets have a WTI crude oil breakeven price of just $40 per barrel. Devon exceeded expectations with an oil production of 664,000 barrels of oil equivalent per day last quarter and has raised its full-year guidance to 655,000-675,000 barrels of oil equivalent per day. The company’s pre-tax profit for 2024 is expected to increase by $75.2 million. Devon has a history of rewarding shareholders through dividends and share buybacks, with a current payout ratio of only 39%.
International oil and gas company ConocoPhillips (NYSE:COP) reported a first-quarter profit of $2.6 billion, operating cash flow of $5.1 billion and a 2% year-over-year production increase. Alongside strong financial results, the acquisition of Marathon Oil Corp (NYSE:MRO) is expected to generate $2.5 to $3.5 billion in EBITDAX over the next five years. ConocoPhillips has raised its annual stock buyback target from $5 billion to $7 billion, aiming to repurchase $20 billion in shares over three years. Additionally, the company plans to increase its dividend by 34% this year.
International oil and gas exploration and production company Occidental Petroleum (NYSE:OXY) has a current forward P/E ratio of 14.9x, below the past 12-month figure of 16x. Analysts recommend buying this stock, with an average target price of nearly $73, representing a 19% upside potential. Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) has also been increasing its stake in Occidental Petroleum and has signed a lithium joint venture agreement with the company, providing new green energy growth prospects.
Refining giant Valero Energy Corp (NYSE:VLO) operates 15 refineries worldwide with a refining capacity of approximately 2 million barrels per day. Additionally, the Diamond Green Diesel joint venture in renewable diesel could boost Valero’s profit margins. In the first quarter of 2024, the segment’s EBITDA profit margin increased from $0.41 per gallon in the same period last year to $0.76, with further improvements expected. Valero Energy’s stock is valued at a P/E ratio of just 7x, about 30% lower than the industry median.
US oilfield services company Baker Hughes (NASDAQ:BKR) is set to benefit from rising demand for natural gas and hydrogen fuel. The company’s gas technology business showed strong growth last quarter, with next fiscal year’s order volume expected to increase to 50%. Mid-June saw a rebound in natural gas prices. Notably, with future growth in US LNG exports and LNG becoming a major business segment for Baker Hughes, next quarter’s revenue and profits could surprise investors.
These undervalued energy stocks present strong value opportunities for investors.
