Are These 5 Energy Penny Stocks Worth Watching This Month?
Over the course of the past year, energy penny stocks have become more popular than usual. To understand why, let’s start back in January of last year. When the pandemic hit, the energy industry and corresponding penny stocks all took a major dive. As the months rolled on, oil and gas demand was low but quickly began to climb.
As we all know, energy penny stocks tend to move with the price of oil, gas, and alternative energy as well. A lot also has to do with virus case numbers. If fewer people are getting sick, more people are willing to travel and go to work. This means that the energy demand could increase. So, here we are, around a year after the pandemic began. Now, we slowly see the production of oil begin to creep back up. Additionally, there are a few factors that are affecting the short-term trajectory of the energy industry.
For one, oil prices are up by as much as 24% since the start of the year. In mid-February, oil prices hit a high of around $60.77, which is its highest since January 2020. In the U.S., most oil and gas production is located in areas where snowfall can be common. This means that production may slow as large winter storms hit the U.S. When supply is lower, oftentimes, demand will go up, thus increasing prices.
Andy Lipow, an analyst for the oil industry, stated that “frigid weather means that many oil wells may be shut-in. Water is produced along with oil, that water can freeze up equipment.”
This sentiment shows that there may be some near-term production issues in the U.S. Obviously, it will take some time before the industry can fully recover. But in the meantime, here are five energy penny stocks to watch.
Energy Penny Stocks to Watch
- Torchlight Energy Resources Inc. (NASDAQ: TRCH)
- Epsilon Energy Ltd. (NASDAQ: EPSN)
- Tellurian Inc. (NASDAQ: TELL)
- Peabody Energy Corp. (NYSE: BTU)
- Centennial Resource Development Inc. (NASDAQ: CDEV)
Torchlight Energy Resources Inc.
Torchlight is a company that we’ve been talking about for several months at this point. In that time, shares of TRCH stock have had multiple days of double-digit percentage gains. This includes the almost 50% gain it took in on Friday, February 12th. Only a month ago, shares of TRCH were trading under $1.40. Also, the volume for TRCH has spiked tremendously. On an average day, TRCH trades around 9 million shares.
However, on Friday, that number jumped to over 75 million for the day. This is a massive spike and also helps to illustrate just how volatile TRCH can be. So, what exactly does Torchlight do? Well, the Plano, Texas-based company was involved in the exploration of oil and natural gas reserves. But that has since changed in a big way with the recent pending merger with Metamaterial.
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While oil and gas may be popular, so is alternative energy. The deal with Metamaterial would turn Torchlight into a company that focuses on clean technologies, including solar power. Recent news of Torchlight’s latest financing round has sparked further interest in the company. Torchlight said it intends to use the net proceeds for general business purposes and provide $5 million of additional bridge financing to Metamaterial Inc. in connection with the combination with Meta. TRCH stock continued surging during after-hours trading on Friday, climbing as high as $3.82 before the final close.
Epsilon Energy Ltd.
Epsilon Energy Ltd. is another North American producer of energy. Specifically, the company produces natural gas via onshore operations. It has a heavy focus on the Marcellus Shale in Pennsylvania. While not much news comes out of Epsilon, we can look back at its most recent financial results. A few months ago, Epsilon put out its Q3 2020 update. In the results, the company brought in net cash of around $3.8 million. Epsilon also reported net revenue of roughly $5.8 million with a net loss of $0.3 million.
Michael Raleigh, CEO of Epsilon stated that “the impact of the oil and gas shale industry adopting capital spending discipline is becoming evident in restrained production volumes and higher forward price expectations for natural gas. The rig count in the U.S. onshore oil basins remains at 60-80% below the peak rig counts observed in March 2020.”
Obviously, we have to take into account that the company may be seeing more demand right now. This quarterly report is for the period ending on September 30th, which was several months ago. Epsilon states that its current focus is heavily based on cash management. This is the most important factor in any oil and gas operation. What’s more is that after the close on Friday, EPSN stock took off and even reached highs of $10 before settling back around $4.88. With the latest surge in energy this week, will it be one of the top stocks to watch to start the week?
Tellurian Inc.
Another energy producer that we’ve discussed several times is Tellurian Inc. The company is a natural gas developer based in Texas. Similar to Epsilon, Tellurian does not provide investors with many updates regarding its day to day operations. A few months ago, the company announced that it would be discarding a massive development plan in the Permian Basin. While this may seem like not so great of news, it does make sense once we take a deeper dive. In the past few months, energy demand has continued to climb, but it is still well below where it was last year. Because of this, many companies are looking to save free-flowing capital wherever they can.
Tellurian states that this project’s discarding is due to the pressure put on the energy industry by the pandemic. Because of the current state of Covid, the company believes that embarking on this massive project would be a financially irresponsible play. In addition to the reduced demand for oil and gas, the company also believes that the future is shifting toward renewable energy.
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The company did state that if the market improves, it may again look at starting this project. But in the meantime, it is a stalemate. With this in mind, Tellurian has worked to conserve cash wherever it can. And with a more than 60% gain over the past six months, TELL stock does have many bulls supporting it. We’ve also got to consider the optimism surrounding liquid natural gas. The Biden Administration’s drive to build green energy infrastructure could lean on LNG as a “bridge fuel,” according to some. So with this in mind, is TELL a penny stock to watch?
Peabody Energy Corp.
Peabody Energy Corp. is one of the penny stocks that saw heightened momentum in the past few trading sessions. At $4.22 per share as of mid-February, BTU stock is heading toward non-penny stock territory. Different from the other penny stocks on this list, Peabody works by producing large quantities of coal. This coal is then utilized to produce electricity in both developed and emerging economies around the world.
Also, its products aim to allow for the industrialization of developing nations, being utilized in the production of steel for infrastructure. The company states that it has a heavy focus on sustainability. This is very important for investors to consider as energy becomes more renewable in the foreseeable future. This month, the company announced an offer to purchase roughly $22.5 million worth of senior secured notes due in 2024.
This is interesting and not often seen these days as most companies are struggling with their existing cash. The news of this buyback shows that Peabody could be in a very advantageous position moving forward. Additionally, the company reported its operating results for the fourth quarter of 2020 and the full 2020 year only a few weeks ago. With an adjusted EBITDA of $103 million for the year, Peabody looks like it could remain in good shape financially.
Glenn Kelow, CEO of Peabody stated that “While 2020 was a year unlike any other with Covid impacting all facets of our business — from the customers we serve to the communities in which we operate — the Peabody team worked hard to position against these challenges and we look forward to driving continued improvements in 2021.”
Centennial Resource Development Inc.
Last on the list in no particular order is Centennial Resource Development Inc. The company is a producer of oil and natural gas, working specifically in the Permian Basin. Centennial also has several assets located in the Delaware Basin, which is a subject of the Permian. A few weeks ago, the company announced that it would be publishing its fourth-quarter 2020 results on February 23rd.
Given the uptick in demand for oil and natural gas of late, this financial report should be quite important for investors. This jump in the oil market, in general, could also be a catalyst itself. Since the beginning of 2021, the price of crude oil via the West Texas Intermediate (WTI) has shot up by around 9% or so.
With the massive amount of aid and vaccines being distributed, many believe that the energy industry could bounce back in the coming months. With over 2,400 drilling locations in the U.S., Centennial Resource has a large amount of exposure to the U.S. energy market.
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Currently, the company is working on reducing its operating expenses to drive profitability. In the third quarter of last year, CDEV managed to lower its LOE per barrel of oil equivalent by 36% over the same period of 2019. With all of this considered, this week could be an important one. Not only are energy prices in the spotlight, but there’s also about a week left under Centennial reports its next round of earnings.
Energy Penny Stocks To Watch
When it comes to energy penny stocks, there are a few big factors that can influence momentum outside of company-specific news. Namely, the price of oil and gas, for instance, can weigh heavily on energy stocks. It can also be a source of bullish momentum as well. So if you’ve got your eye on any of these companies or others, make sure you also keep a close watch on what the sector is doing as a whole.
