Three Microcap Stocks from the Recovering Oil & Gas Sector Worth Watching
The past year has been tough on just about everybody—ranging from the individual day trader to large brokerage firms and hedge funds. But the carnage has been especially bloody in the oil & gas industry. With stay-at-home orders in place, nobody has been travelling or commuting anywhere.
Their misery reached its nadir in April 2020, when West Texas Intermediate oil prices (WTI) went negative. Yeah, negative – as in, producers had to pay “buyers” to take their oil. On April 20, a barrel of oil “sold” for -$37.64.
Prices recovered shortly after, but only marginally. For much of 2020, WTI traded in a tight 30-40 USD band. From December 2020 onward, though, prices have rallied above 60 USD. COVID vaccines are now here, and they’re devastatingly effective.
Translation: a return to “normal” is in sight. And with that, consumption will rise sharply. So much so that analysts expect demand will significantly outrun supply in the short term.
That means oil prices will rise and remain elevated for some time. Because of this, we expect the oil & gas sector to make a recovery in 2021. But what if you don’t have the resources to buy mass quantities of Exxon stock?
Fortunately, microcap oil and gas stocks also stand to benefit from the coming post-pandemic boom. Below, we’ll talk about three microcap O&G stocks that may break out in the coming months.
Pulse Seismic (OTCQX:PLSDF)
Even in an industry as old-school as oil & gas, data is now king. Seismic companies has shot up tremendously in value lately, as they have spent years collecting invaluable information in the field.
Not sure why? Here’s a primer: drilling an oil well is an expensive venture. If the result is a dry hole, that investment becomes a loss. Many drillers have done their own seismic surveys in the past. However, as more oil patch land gets seismically mapped, it’s becoming more cost-effective to purchase this data from seismic companies.
This is where Pulse Seismic (OTCQX:PLSDF) comes in. Through its own surveys and shrewd acquisitions, they’ve amassed one of the greatest collections of seismic data in Western Canada. In all, they have a library containing over 829,000 square kilometres of 2D seismic data and over 65,000 square kilometres of 3D data.
Now, most producers in Western Canada have been hammered lately. Even before COVID, a multi-year oil glut had squeezed all but the most diversified & deep-pocketed firms. In a cost-conscious environment, junior oil exploration firms can’t afford to gamble. So rather than drill & pray, they’ll invest in the service that Pulse Seismic is providing.
88 Energy (OTCMKTS: EEENF)
Last year, producers filled oil storage facilities to the bursting point. But post-COVID demand is starting to draw down these inventories. As a result, oil prices have risen above $60/barrel. So it makes sense not just to restart wells, but also to explore again.
All exploration firms stand to gain from this rising tide. But what if you don’t have the capital to invest in Exxon, Shell, or ConocoPhillips at scale? Fortunately, there are countless publicly traded junior firms out there as well.
Few of them are as enticing as 88 Energy. This firm calls Perth, Australia home, so they are an unknown quantity in North America. However, on their Alaska leasehold, they could be close to hitting pay dirt. To be exact, company officials estimate their Merlin-1 well could pump 645 million barrels. They are also planning to break ground on Harrier-1 soon – production on this play could reach 417 million barrels.
Confidence in these estimates is relatively high. 88 Energy and Burgundy Xploration’s (their partner in this venture) leasehold sits adjacent to land where other firms have made significant oil discoveries. Also, the plot sits atop the Nanushuk Formation, the same setup that has produced significant discoveries elsewhere in the Northern Slope.
Given these facts, the likelihood of a strike is fairly high. At the same time, EEENF (88 Energy’s OTC ticker symbol) is sitting at an uber-affordable 0.018 USD per share. Earlier in April, hype built up and then immediately died after mechanical difficulties on-site. So if you want to get in on this deal, now’s your chance.
Learn more about this firm – check out the 88 Energy stock price discussion over at InsiderFinancial.com.
Foothills Exploration (OTCMKTS: FTXP)
Alaska isn’t the only place seeing exploration crews these days. The plains of Wyoming – particularly in the Wind River Basin – are also seeing action. This region is no stranger to oil & gas development – today, over 60 fields are in production, and they sit atop 17 hydrocarbon-bearing formations.
This is where junior producer Foothills Exploration is poking around for oil. To be clear, FTXP has seen better days – as the 2015 oil glut ripped through the industry, Foothills was not immune. They racked up a ton of debt as their revenues fell – a recipe for stock valuation disaster.
But in 2021, FTXP appears to be making a fresh start. They are working to pay down their debt AND pursue new plays. That’s what has brought them to the Wind River Basin – according to their engineering consultants, 21 million barrels of oil lies on one of their plays.
At the same time, Foothills has created an LLC called New Energy Ventures. Foothills’s executive team understands where the world is going long-term. So, that’s why they founded this new company – to capitalize on the coming hydrogen and carbon capture boom. Whether they succeed or fail remains up in the air. But in the short term, at 0.0042 USD, FTXP is a very affordable high-risk equity.
There’s Money To Be Made (in the Short Term)
The world continues to move toward a low-carbon future. But as we emerge from the COVID pandemic, demand for oil & gas will surge. For savvy investors who don’t fear risk, there are plenty of opportunities out there.