February 4, 2015
Small-Cap Value Oil and Energy Stocks
I like researching and writing these articles. I always try to post here atleast once a month. I could probably post almost every day because I love analyzing and blogging but I doubt my girlfriend would like that. She would probably punch me.
The drop in oil prices has brought a lot of energy companies share prices down significantly. Key Energy Services (KEG) is a $313 million dollar well servicing company out of Houston, Texas. This small-cap has $443.8 million in net tangible asset value(tangible assets - total liabilities). So with a market cap of $313 million and tangible assets of $443 million it is selling for less than all the working capital and equipment it owns. This is even with the stock price up a whopping 17% today. In 2013 it had $64 million in free cash flow. As a small company the stock presents the possibility of significant growth in stock price as it recovers. The downside is earnings haven't been consistent over the years.
Energy XXI (EXXI) owns oil and natural gas wells and has a cool $1.42 billion in net tangible assets and a market cap of just $336 million. This is 76% below net tangible assets and 82% below book value. The company was profitable since 2012 but earnings are trending down.
The final oil stock is Parker Drilling (PKD) a $384 million dollar company with $492 million in net tangible assets. So we are still at a discount to net tangible assets. This one is not as cheap as the ones above, however, it boasts a lot more profitability. Earnings are more consistent. Infact it was profitable in the second and third quarter.
If oil prices are actually bottoming here as they appear to be doing small companies will have some nice appreciation. They come with more long-term risks of course versus their large cap counterparts. The ones above are basically penny stocks which is fine with me as they are traded on good exchanges and present some value and technical opportunity. I hope you enjoyed these oil and energy ideas on this value investing small cap stocks blog.