We recently published a list of 10 Best Oil and Gas Penny Stocks To Buy. In this article, we are going to take a look at where Oil States International, Inc. (NYSE:OIS) stands against the other best oil and gas penny stocks to buy.
The global oil and gas industry is witnessing a surge in investments, reflecting its resilience amidst an evolving energy landscape. Despite growing attention toward renewable energy sources, the demand for oil and gas remains robust, driven by the ever-increasing needs of both developed and developing economies. As the world’s appetite for energy intensifies, so does the necessity for sustained capital investment in the oil and gas sector.
According to the Upstream Oil and Gas Investment Outlook, a report by the International Energy Forum and S&P Global Commodity Insights, annual upstream investments must increase by $135 billion to reach $738 billion by 2030 to ensure a stable supply. This figure represents a 15% rise compared to estimates from a year ago and is 41% higher than projections made two years ago. This escalation is attributed to rising production costs and an improved demand outlook. The report indicates that a cumulative $4.3 trillion will be needed for upstream investments between 2025 and 2030, even as demand growth plateaus.
The rise in upstream capital expenditures, which grew by $63 billion year-on-year in 2023 and is expected to increase by another $26 billion in 2024, has placed the annual investment level above $600 billion for the first time in a decade. Notably, North America is expected to be a significant contributor to this growth, accounting for a third of the spending in 2024. However, Latin America is emerging as a vital player in the global supply chain, poised to become the largest source of incremental capital expenditure growth in 2024, surpassing North America for the first time in two decades. The region’s prominence is set to continue through 2030, particularly in conventional crude projects, with substantial expansions planned in Brazil and Guyana. These developments underscore the ongoing importance of the Americas in the global oil and gas supply chain.
The industry’s improved investment landscape is also driven by factors such as resilient production in regions like Russia, Iran, and Venezuela, despite geopolitical challenges. Additionally, non-OPEC supply has exceeded expectations, and spare production capacity has been restored. Nevertheless, the risk of underinvestment and potential supply shortages could resurface if commodity prices, geopolitical dynamics, or environmental regulations shift significantly.
Meanwhile, OPEC remains a crucial player in maintaining market stability. In an address to the International Chamber of Commerce in Vienna, Dr. Hasan M. Qabazard, Director of the Research Division at OPEC, emphasized the organization’s commitment to ensuring energy security and meeting future demand. He highlighted that while energy prices have been volatile, the global economy has shown resilience, and market stability remains a top priority. OPEC’s strategy aims to balance the supply and demand dynamics, ensuring that oil continues to play a vital role in the energy mix for decades to come.
The current environment presents a promising opportunity for investors looking to capitalize on the resurgence of the oil and gas sector, particularly in the penny stock category. While penny stocks are often associated with higher risk due to their low price and smaller market capitalization, they also offer substantial upside potential. Many companies in this category are well-positioned to benefit from the increasing capital inflow into the industry, making them attractive options for investors seeking exposure to the oil and gas markets at a relatively low entry point.
Our Methodology
For this article, we used the Finviz screener and identified 20 stocks in the oil and gas sector having Buy or Buy-equivalent ratings from analysts and with share prices under $5, as of September 27. Next, we examined Insider Monkey’s data on 912 hedge funds as of Q2 2024. We narrowed down our list to 10 stocks most widely held by institutional investors and ranked them in ascending order of the number of hedge funds that have stakes in them as of Q2 of 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An offshore oil installation platform, its production arm reaching out to the horizon.
Oil States International, Inc. (NYSE:OIS)
Number of Hedge Fund Holders: 22
Share Price: $4.58
Oil States International, Inc. (NYSE:OIS) is a diversified provider of capital equipment and engineered products catering to the energy, industrial, and military sectors worldwide. The company operates through three primary segments: Well Site Services, Downhole Technologies, and Offshore/Manufactured Products. Each segment provides specialized offerings that support drilling, completion, and production activities in the oil and gas sector, along with other industries such as industrial and military.
The company recently announced its Q2 2024 earnings, showcasing strong performance across its segments. Oil States International, Inc. (NYSE:OIS) beat analyst expectations with an EPS of $0.07, surpassing the anticipated $0.035. This achievement was driven by increased demand for subsea and production systems, particularly in offshore basins. The company’s consolidated revenues increased by 11% sequentially, while adjusted EBITDA saw a robust growth of 38%, reflecting improved operational efficiencies and higher project completions.
The Offshore/Manufactured Products segment was a key contributor to these results, with a 17% sequential increase in revenues, totaling $102 million. Adjusted segment EBITDA rose by 27%, benefiting from a backlog of $300 million as of June 30, 2024, and a strong quarterly book-to-bill ratio of 1.0. The Well Site Services segment, despite a 2% sequential decline in revenues due to lower U.S. land activity, reported a 30% sequential increase in adjusted segment EBITDA, supported by the strategic optimization and exit of underperforming locations. Additionally, the Downhole Technologies segment reported a 16% increase in revenues and a 42% growth in adjusted segment EBITDA sequentially, driven by stronger international sales.
In Q2 2024, Oil States International, Inc. (NYSE:OIS) generated $10 million in cash flows from operations, reflecting a strong liquidity position. The company used these funds to repurchase convertible debt and buy back common stock, demonstrating a commitment to enhancing shareholder value. Its gross debt to EBITDA ratio stands at 1.5x, and net debt to EBITDA ratio is 1.2x, providing significant financial flexibility.
Hedge fund interest in the company decreased slightly, with 22 hedge funds holding stakes in Q2 2024, compared to 26 in the previous quarter. Overall, with stable oil prices, strong demand for its products, and strategic cost management, Oil States International, Inc. (NYSE:OIS) is well-positioned for future growth.
Overall OIS ranks 5th on our list of best oil and gas penny stocks to buy. While we acknowledge the potential of OIS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than OIS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.