The oil market is built of the following set of key ideas: either oil production and production capacity will be able to ramp up over the near term or we will face a supply shortage.
At least, that’s the prognosis from Goldman Sachs, who recently put out a piece of analysis stating that Oil would go to at least $80/bbl due to an increase in demand by 6 million barrels of oil per day over the next 6 months.
Supply is already tight in the oil market. Such an increase, given the lack of new production and production capacity, could spark a genuine shortage.
At the same time, the oil market is not positioned for such a jump in terms of investor activity. Speculators are long about 500k contracts on a net basis, according to the Commitment of Traders report from the CFTC. That’s well below any kind of speculative extreme.
In other words, oil producers and oil investors are under-exposed to a potential jump in prices based on supply and demand, according to Goldman Sachs.
That forms the backdrop for oil producer stocks, such as Callon Petroleum Company (NYSE: CPE), Viking Energy Group Inc (OTC US: VKIN), and Helmerich & Payne Inc (NYSE: HP).
Callon Petroleum Company (NYSE: CPE) was teetering on the verge of extinction following the pandemic lockdown crash a year ago. However, the stock has come roaring back, up 600% in the past six months but now nicely consolidating on the charts under the key $40 level, and perhaps on the verge of a fresh breakout.
The company bills itself as an independent oil and natural gas company focused on the acquisition, exploration, and development of high-quality assets in the leading oil plays of South and West Texas.
Callon Petroleum Company (NYSE: CPE) recently reported results of operations for the three months and full-year ended December 31, 2020, including full-year 2020 production of 101.6 MBoe/d (63% oil), an increase of 146% over 2019 volumes, year-end proved reserves of 475.9 MMBoe (61% oil), and net cash provided by operating activities of $559.8 million and adjusted free cash flow of $10.7 million, including net cash provided by operating activities of $368.1 million and $122.6 million of adjusted free cash flow generation over the last three quarters.
Joe Gatto, President and Chief Executive Officer commented, “In a year marked by extraordinary volatility in commodity prices and workplace challenges created by the COVID-19 pandemic, our newly integrated team executed flawlessly on a revamped set of operational and financial initiatives that ultimately delivered over $120 million of adjusted free cash flow since the beginning of the second quarter, dramatically improving our liquidity and absolute debt position. Importantly, these accomplishments were complemented by significant achievements related to employee safety and environmental emissions.”
And the stock has been acting well over recent days, up something like 10% in that time.
Callon Petroleum Company (NYSE: CPE) generated sales of $359.9M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 21.6% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($24.4M against $672M, respectively).
Viking Energy Group Inc (OTCMKTS: VKIN) has not made a run with the rest of the space over the past few months despite strong and growing results, which could mean it has more upside potential if we a fresh wave of momentum in the group.
The company bills 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. It 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.
Viking Energy Group Inc (OTCMKTS: VKIN) most recently announced performance metrics, which continued to show tremendous promise. According to its filing, Viking recorded new top marks in topline performance, posting 2020 revenues above $40 million, which is up over 400% from 2018.
James Doris, President and Chief Executive Officer of both Camber and Viking, commented, “We are pleased with Viking’s results given the challenges faced in 2020. In many respects the year was about survival for E&P companies given the unprecedented price environment and market conditions, and not only did we endure thanks to the commitment and perseverance of our entire team we also managed to improve in key areas, including increasing overall revenues and reducing debt at the Viking level. We remain focused on executing on our strategy and forging a path toward profitability.”
Over the past month, shares of the stock have been pulling back into key support, which could offer oil investors an interesting opportunity.
Viking Energy Group Inc (OTCMKTS: VKIN) managed to rope in revenues totaling $8.8 million in overall sales during the company’s most recently reported quarterly financial data – a figure that represents a rate of top line growth of 16.9%, as compared to year-ago data in comparable terms, paired with nearly $8 million on hand in cash.
Helmerich & Payne Inc (NYSE: HP) 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 are 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.”
If you’re long this stock, then you’re liking how the stock has responded to the announcement. HP shares have been moving higher over the past week overall, pushing about 18% to the upside on above average trading volume. Shares of the stock have powered higher over the past month, rallying roughly 17% in that time on strong overall action.
Helmerich & Payne Inc (NYSE: HP) pulled in sales of $296.2M in its last reported quarterly financials, representing top line growth of -53.3%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($610.2M against $251.6M).
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