The Russia-Ukraine war has pushed energy prices up. However, the market has cooled down considerably, with oil prices far below their near $130 per barrel peak. Furthermore, the OPEC+ oil cartel might approve increases in crude production in the near term, with pressure from the United States on the cartel’s largest producer Saudi Arabia.
Meanwhile, the Biden administration has asked U.S. oil and gas producers to produce more to bring prices down. The administration has also stated that it will release 30 million barrels of oil from its Strategic Petroleum Reserve.
The resurgence of COVID-19 cases and consequent lockdowns in China has dampened energy demand, which has caused oil prices to decline about 7% to their lowest level in more than a week. Also, hopes for progress in peace talks between Russia and Ukraine helped ease some energy supply concerns. Given this backdrop, we think the fundamentally weak energy stocks Patterson-UTI Energy, Inc. (PTEN), Tellurian Inc. (TELL), NextDecade Corporation (NEXT), Vertex Energy, Inc. (VTNR), and Borr Drilling Limited (BORR) might be best avoided now.
Patterson-UTI Energy, Inc. (PTEN)
PTEN in Houston, Tex., provides onshore contract drilling services to the oil and natural gas operators in the United States and globally. The company operates through the broad segments of Contract Drilling Services; Pressure Pumping Services; and Directional Drilling Services.
On March 8, PTEN announced that it had made a strategic investment in a geothermal energy development company called Criterion Energy Partners, Inc., which is expected to improve the economics and reliability of geothermal power. However, it might take some before this venture results in substantial gains for the company.
For its fiscal fourth quarter, ended December 31, PTEN’s operating loss increased 190.5% year-over-year to $360.80 million. Net loss and net loss per common share rose 239.7% and 194.7%, respectively, from the prior-year period to $361.83 million and $1.68.
Analysts expect PTEN’s EPS to remain negative at least until through its fiscal year 2022.
The stock has declined 6.5% in price intraday to close yesterday’s trading session at $15.06.
PTEN’s POWR Ratings reflect this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
PTEN has a Value, Stability, and Sentiment grade of D. In the 14-stock Energy – Drilling industry, it is ranked last. The industry is rated D.
Click here to see the additional POWR Ratings for PTEN (Growth, Momentum, and Quality).
Tellurian Inc. (TELL)
TELL is a natural gas company focused mainly on developing liquefied natural gas (LNG) production on the United States Gulf Coast and engages in building up infrastructure assets. Tell is based in Houston, Tex.
On March 28, TELL announced that it had issued a limited notice, under its executed Engineering, Procurement and Construction (EPC) contract, to Bechtel Energy Inc. to commence the construction of phase one of the Driftwood LNG terminal, an LNG export facility near Lake Charles, La. However, there might still be some time before gains will be realized from the terminal.
For its fiscal year ended December 31, TELL’s net cash used in investing activities increased 4,327.3% year-over-year to $57.87 million. Its net loss and net loss per common share for the year stood at $114.74 million and $0.28, respectively.
The negative $0.22 consensus EPS estimate for the fiscal year 2023 indicates a 37.5% year-over-year decrease.
TELL’s shares have declined 7% in price intraday to close yesterday’s trading session at $5.43.
It is no surprise that TELL has an overall F rating, which translates to Strong Sell in our POWR Rating system.
TELL has an F grade for Value, Stability, and Quality and a D grade for Sentiment. It is ranked last in the 89-stock Energy – Oil & Gas industry.
To see the additional POWR Ratings for Growth and Momentum for TELL, click here.
NextDecade Corporation (NEXT)
NEXT is a Houston, Tex.-based LNG company that is focused on activities like liquefaction and the sale of LNG. The company’s operations focus mainly on the Rio Grande LNG terminal facility in the Port of Brownsville, southern Texas.
On March 24, NEXT announced the execution of an agreement with Guangdong Energy Group Natural Gas Co., Ltd. for the long-term supply of LNG for 20 years from NEXT’s Rio Grande LNG export project in Brownsville, Tex. The gains from the supply agreement might be stretched over a long period.
For its fiscal year ended December 31, NEXT’s net loss attributable to common stockholders increased 40.3% year-over-year to $40.40 million, while net loss per common share came in at $0.34, up 41.7% from the prior year. Its net cash provided by investing activities stood at a negative $18.53 million, down 200.1% from the prior year.
The Street’s negative $0.09 EPS estimate for its fiscal quarter, ending March 31, 2022, reflects an 80% year-over-year decrease.
The stock has declined 4.1% in price intraday to close yesterday’s trading session at $6.10.
NEXT’s poor prospects are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system.
NEXT has a Value and Quality grade of F and a Growth grade of D. It is ranked #87 in the Energy – Oil & Gas industry.
Click here to see the additional POWR Ratings for Momentum, Stability, and Sentiment for NEXT.
Vertex Energy, Inc. (VTNR)
VTNR operates as an environmental services company that provides services designed to aggregate, process, and recycle industrial and commercial waste systems in the Gulf Coast and Central Midwest region of the United States. The Houston, Tex., company operates through the three broad segments of Black Oil; Refining and Marketing; and Recovery.
On January 25, VTNR announced that it had agreed with Safety-Kleen Systems, Inc., to terminate the planned divestiture of its used motor oil collection and recycling assets. “Given the considerable time and resources required to support what has become a costly and time-consuming regulatory review of our planned asset divestiture to Safety-Kleen, we have decided to terminate the sale,” stated Benjamin P. Cowart, President, and CEO of VTRN.
VTNR’s loss from continued operations, net of tax, increased 583.5% year-over-year to $14.71 million. For its fiscal year ended December 31, its net cash used in operating activities and net cash used in investing activities from continuing operations stood at $15.52 million and $14.73 million, respectively, up 160.8% and 438.7% from the prior year.
The Street expects VTNR’s EPS to decline 1,200% year-over-year to negative $0.11 for the fiscal quarter, ending March 31, 2022.
VTNR’s shares have declined 2.7% in price intraday to close yesterday’s trading session at $9.14.
VTNR has an overall D grade, which translates to Sell in our POWR Rating system.
VTNR has an F grade for Growth and Stability and a D grade for Value. It is ranked #85 in the Energy – Oil & Gas industry.
To see the additional POWR Rating for Momentum, Sentiment, and Quality for VTNR, click here.
Borr Drilling Limited (BORR)
Based in Hamilton, Bermuda, BORR operates as an offshore drilling contractor to the global oil and gas industry. The company operates as the owner and contractor of jack-up rigs for operations in shallow-water areas, which includes the provision of related equipment and work crews. It serves oil and gas exploration and production companies.
For the fiscal fourth quarter, ended December 31, BORR’s total net financial expenses increased 34.2% year-over-year to $31.40 million. Its net cash from investing activities decreased 89.8% from the prior-year period to $1.40 million.
Analysts expect EPS to remain negative at least until its fiscal year 2022.
BORR’s stock has declined 1.5% in price over the past five days and 5.8% intraday to close yesterday’s trading session at $3.25.
BORR has an overall D rating, which equates to Sell in our proprietary rating system.
BORR has a Quality grade of F and a Value grade of D. It is ranked #13 in the Energy – Drilling industry.
In addition to the POWR Rating grades we have stated above, one can see BORR ratings for Growth, Momentum, Stability, and Sentiment here.
PTEN shares were trading at $15.18 per share on Tuesday afternoon, up $0.12 (+0.80%). Year-to-date, PTEN has gained 80.15%, versus a -2.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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