We recently published a list of 8 Most Undervalued Oil Stocks To Buy According To Analysts. In this article, we are going to take a look at where GeoPark Limited (NYSE:GPRK) stands against other most undervalued oil stocks to buy.
The energy sector is buzzing with change in 2024, creating a mix of exciting opportunities and new challenges for investors. As the world embraces renewable energy sources and oil prices stabilize, the market finds itself at a fascinating crossroads. Oil is no longer the untouchable giant it once was, but it’s far from fading away. Instead, it’s adapting to new realities, with smart investors eyeing undervalued oil stocks that still hold potential amidst this evolving landscape.
Brent crude oil prices are expected to hover around $82 per barrel, slightly up from $81 in 2023. This points to a return to pre-pandemic price levels, thanks to OPEC+ strategically limiting production to maintain supply-demand equilibrium. At the same time, retail gasoline prices should stay stable at around $3.30 per gallon, offering some predictability in fuel costs. Meanwhile, U.S. crude oil production is on the rise, with output expected to jump from 12.9 million barrels per day in 2023 to 13.3 million barrels per day in 2024. All signs indicate that the U.S. is gearing up to remain a key player in the global oil game.
While the U.S. economy is forecasted to grow by 2.6% in 2024, energy companies are under pressure to strike a balance between boosting production and addressing environmental concerns. The world’s demand for energy continues to rise, and geopolitical tensions add another layer of unpredictability to the market. Political unrest in countries like Libya, for instance, has raised concerns about potential disruptions in global oil supply. But even with these uncertainties, the fundamentals of the oil industry remain solid, and analysts believe that strategic production cuts by OPEC+, coupled with strong demand from developing nations, will keep oil stocks attractive.
Interestingly, oil and gas companies are ramping up their investments to meet future demand. A report by the International Energy Forum and S&P Global Commodity Insights suggests that upstream investments will need to grow by $135 billion annually to ensure a stable supply by 2030. With North America and Latin America expected to take the lead in capital expenditures, the industry is witnessing a resurgence in investment activity. Brazil and Guyana, in particular, are emerging as major contributors, reinforcing the importance of the Americas in the global oil supply chain.
Despite the rise of renewable energy, oil remains indispensable for the foreseeable future. The current environment offers a sweet spot for investors looking to take advantage of undervalued oil stocks. While these stocks often carry higher risks due to their smaller market caps, they also come with significant upside potential. As global oil consumption continues to grow, driven by the energy needs of both developed and emerging economies, savvy investors are positioning themselves to benefit from this ongoing demand.
In this dynamic setting, the search for hidden gems in the oil sector becomes even more exciting. The eight undervalued oil stocks highlighted in this article reflect both the resilience of traditional energy markets and the opportunities arising from a changing global landscape. For those looking to navigate the energy transition while still capitalizing on the growth of oil demand, these stocks present an intriguing opportunity.
Our Methodology
For this article, we use stock screeners to identify nearly 20 stocks in the oil industry that have a buy or better rating from analysts with a forward Price to Earnings (P/E) ratio of less than 15 and price target above current market price as of October 14, 2024. Next, we narrowed our list to 8 stocks with the highest upside potential. We also mentioned the number of hedge fund holdings for each stock as well. The hedge fund sentiment was taken from Insider Monkey’s Q2 database of 912 hedge funds. The eight undervalued oil stocks are listed in ascending order of their upside potential.
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 aerial view of a large oil rig located in the ocean.
GeoPark Limited (NYSE:GPRK)
Upside Potential: 84%
Forward Price to Earnings (P/E) ratio: 2.53
Number of Hedge Fund Holders: 15
GeoPark Limited (NYSE:GPRK) stands out among undervalued oil stocks with a forward P/E ratio of just 2.53 as of October 14, signaling a significant buying opportunity. Analysts see an 84% upside, with a target price of $15.33 compared to its current share price of $8.32. This makes GeoPark an appealing pick for investors looking for a bargain in the oil and gas sector.
Operating across Chile, Colombia, Brazil, Argentina, Ecuador, and other Latin American regions, GeoPark Limited (NYSE:GPRK) specializes in exploring and producing oil and gas reserves. The company has a strong reputation for managing operations efficiently, and its Q2 2024 earnings report reinforces its robust fundamentals.
For the second quarter ending June 30, 2024, GeoPark Limited (NYSE:GPRK) reported a 14% jump in revenue to $190 million, driven by favorable oil prices. Adjusted EBITDA rose 15% to $128 million, reflecting an impressive EBITDA margin of 67%. Despite currency-related tax adjustments, the company posted a net profit of $25.7 million or $0.50 per share, showcasing sound financial health.
GeoPark Limited (NYSE:GPRK) operational efficiency is evident from its capital expenditure management. The company invested $49 million in the quarter, generating nearly three times that amount in adjusted EBITDA. The return on average capital employed over the past 12 months stood at a remarkable 38%. Meanwhile, GeoPark maintained a healthy cash position of $66 million after repurchasing shares, paying taxes, acquiring new assets, and distributing dividends.
Strategically, GeoPark Limited (NYSE:GPRK) recent acquisition of the Vaca Muerta assets is expected to boost production. The newly acquired Mata Mora Norte Block alone is contributing 12,500 barrels per day, and further exploration in the Llanos basin offers promising growth opportunities. The company’s ongoing exploration activities are also expected to ramp up production levels heading into 2025.
GeoPark Limited (NYSE:GPRK) has demonstrated its commitment to shareholder returns, distributing $7.5 million in dividends during the quarter and repurchasing $43.7 million in shares. With strong cash flow, disciplined capital management, and strategic growth initiatives, GeoPark Limited (NYSE:GPRK) is well-positioned to capitalize on future opportunities, making it a compelling choice for investors seeking undervalued oil stocks with long-term potential.
Overall, GPRK ranks 2nd on our list of most undervalued oil stocks to buy according to analysts. While we acknowledge the potential of GPRK 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 GPRK 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.