Four Small-Cap Energy Stocks Ready to Pump Out Cash

Nov 1, 2021

Oil and gas prices have risen dramatically in recent months as people have started to travel more and demand for fuel has increased. Meanwhile, oil and gas supplies have remained low as most energy companies concentrate on mending their balance sheets rather than digging new wells.

Some investors have become more interested in big energy firms like Exxon Mobil (XOM) and Chevron (CVX) or energy exchange-traded funds as earnings season approaches. Small-cap stocks, on the other hand, have potential and can occasionally be bargains because fewer investors are paying attention to them.

To uncover small-caps with growth potential, we looked for companies with market values of less than $5 billion that are likely to expand their free cash flow faster than their peers in the coming quarter. We also looked for companies with sound balance sheets, excluding those with high debt or whose quarterly interest payments are not at least twice as large as their operational earnings.

In their upcoming quarterly reports, four corporations are likely to exhibit exceptionally strong cash flow growth and have debt levels that appear reasonable.

Little But Mighty

These small-cap energy stocks are expected to have an increase in free cash flow:

Bonanza Creek Energy (BCEI) is a Denver-based oil and gas company that recently announced an all-stock merger with Extraction Oil & Gas (XOG), another Colorado company. The firms claim to be the largest pure-play energy producer in Colorado's Denver-Julesburg Basin, and that their dividend would be increased. Civitas will be the new company's name, and it will, according to the corporations, have net-zero emissions in its operations (as opposed to Scope 3 emissions, which are the emissions caused by the items they make).

Rex American Resources (REX) manufactures ethanol, distillers' grains, and non-food-grade maize oil, all of which could become increasingly essential as the United States transitions to lower-emissions fuels. The company is also pursuing carbon capture and sequestration, which it sees as having "the potential to be a major player in that industry."

Consol Energy, a gas and coal producer, used to own CNX Resources (CNX). CNX took over the natural gas component of that company when it split in 2017. It is benefiting from increased global gas demand, which is up 41% this year.

Helmerich & Payne (HP) is a Tulsa-based oil services company. As producers cut back on drilling, oil service businesses have struggled. However, there is indications of a production comeback in the United States, as producers begin to take advantage of increased oil and gas prices. Firms like Helmerich are benefiting from this. In July, CEO John Lindsay stated, "We remain hopeful that current oil prices will translate into increased 2022 exploration and production drilling budgets and activity in the US land market."

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