What’s Driving the Energy Trade? (VKIN, CEI, HP, FANG, XEC, SBOW, MTDR, HES)

You may have noticed your price going up at the pump.

That’s not some trick of perception. Energy prices have been shooting higher because the root driver of gas prices is, naturally, oil prices. And oil prices are going higher for reasons that are very hard to halt for politicians and policymakers.

The fact is: it’s not very popular to invest in new oil supply sources.

Think of it as the polar opposite of investing in new ways to produce electric vehicles. While that has obvious connotations in political terms, the financial implications for investors are not nearly so clear.

In fact, as investments in new oil production capacity dry up, the financial value of firms capable of providing more oil on a value basis in terms of fixed cost investments could potentially skyrocket. The political value of oil has plummeted over recent quarters. But its financial value has risen.

These are the facts.

As such, one should expect the value of small-cap stocks in the oil space to benefit because they don’t face the same type of political pressure to welch in the face of an obvious financial windfall.

That could pay off for companies such as Helmerich & Payne Inc (NYSE:HP), Diamondback Energy Inc (NASDAQ:FANG), Viking Energy Group Inc (OTCMKTS:VKIN), Cimarex Energy Co (NYSE:XEC), SilverBow Resources Inc (NYSE:SBOW), Matador Resources Co (NYSE:MTDR), Camber Energy Inc (NYSEAMERICAN:CEI), and Hess Corporation (NYSE:HES), a few of which we discuss more thoroughly below.

Cimarex Energy Co (NYSE:XEC) is an independent oil and gas exploration, production company, and an interesting name in the space with nearly 620 million barrels of proven reserves and owned interests in roughly 2,800 productive oil and gas wells. The stock has also been very popular over the past 13 months, rising as much as 420% in that time.

The company’s principal operations in the Permian Basin and Mid-Continent areas of the U.S.

Cimarex Energy Co (NYSE:XEC) recently announced that Megan Hays will join Cimarex as Vice President of Investor Relations. Megan joins Cimarex from Concho Resources Inc., where she most recently served as Vice President of Investor Relations and Public Affairs. According to the release, she has 15 years of experience in strategic communications, sustainability, corporate development and capital markets within the energy industry. Megan will report to Senior Vice President and Chief Financial Officer, Mark Burford.

Mr. Burford, said, “We are excited to have Megan join our team. She is an accomplished leader with a strong network of relationships across the financial community. Megan’s experience in the industry – from strategy to sustainability – will make her a great addition to our company.”

Even in light of this news, XEC hasn’t really done much of anything over the past week, with shares logging no net movement over that period. Shares of the stock have powered higher over the past month, rallying roughly 5% in that time on strong overall action.

Cimarex Energy Co (NYSE:XEC) pulled in sales of $679.5M in its last reported quarterly financials, representing top line growth of 43.7%. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($523.8M against $886M, respectively).

Viking Energy Group Inc (OTCMKTS:VKIN) has assets in Texas, Louisiana, Mississippi, and Kansas. It is also currently the majority-owned subsidiary of Camber Energy Inc (NYSEAMERICAN:CEI), and a merger agreement is in the works that could increase the value of both companies through geographic and operational synergies.

The company describes itself as an independent exploration and production company focused on acquiring, enhancing, and developing oil and natural gas properties in the Gulf Coast and Mid-Continent regions.

Viking Energy Group Inc (OTCMKTS:VKIN) recently posted sturdy results for Q1, including revenues of nearly $10.5 million and an adjusted EBITDA of $4.63 million.

James Doris, President and Chief Executive Officer of both Camber and Viking, commented, “We are pleased with Viking’s Q1 results, especially following the unprecedented conditions experienced in 2020. We are extremely encouraged with the foundation we have established, and are intensely focused on pursuing growth opportunities.”

Importantly, the company was able to drive nearly 20% sequential quarterly topline growth ahead of any clear sense of full economic “reopening”, when analysts expect energy demand to grow significantly.

Viking Energy Group Inc (OTCMKTS:VKIN) shares have been on the move higher in recent action, trending off key range support in the $0.40 area in late May to test and break moderately above the critical 50-day MA. As energy commodities gain in value at the market and as the company continues to build out its production base, the crowd could find the stock over coming months.

Helmerich & Payne Inc (NYSE:HP) bills itself as a company committed to delivering industry leading levels of drilling productivity and reliability, and represents a dead-center idea in this portfolio thesis. Provided the price of oil rises to a level where the opportunity is too ripe to avoid for new production capacity, demand for its services will jump. Plain and simple. It also directly benefits from its operated rig fleet.

Through its subsidiaries, the Company designs, fabricates and operates high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling, and survey management technologies. As of March 31, 2021, H&P’s fleet included 242 land rigs in the U.S., 32 international land rigs and seven offshore platform rigs.

Helmerich & Payne Inc (NYSE:HP) most recently reported earnings for its latest quarter, including news that H&P’s North America Solutions segment exited the second quarter of fiscal year 2021 with 109 active rigs up roughly 15% during the quarter, the Company ended the quarter with $562 million in cash and short-term investments and no amounts drawn on its $750 million revolving credit facility culminating in approximately $1.3 billion in available liquidity, and Quarterly North America Solutions operating gross margins increased $19 million to $64 million sequentially, as revenues increased by $48 million to $250 million and expenses increased by $29 million to $186 million.

President and CEO John Lindsay commented, “The increase in activity we experienced during the first half of our fiscal 2021 year has been encouraging, particularly in light of the record industry downturn last year. As in the past, our strong market standing and flexible financial position is enabling us to concentrate on long-term, strategic objectives during volatile and uncertain markets. We are making good progress in deploying digital technology solutions and introducing new commercial models to the industry, but realize there is still a lot of work ahead of us.”

Even in light of this news, HP hasn’t really done much of anything over the past week, with shares logging no net movement over that period.

Helmerich & Payne Inc (NYSE:HP) managed to rope in revenues totaling $296.2M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -53.3%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($610.2M against $251.6M).