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3 Under-the-Radar Oil & Gas Stocks for 100% Returns by 2025

With tightening of monetary policies, global GDP growth has decelerated. This has resulted in a correction for oil as demand has declined on a relative basis. Further, oil and gas stocks have remained depressed. Also, several names trade at a valuation gap. In general, investors are aware of the likes of Chevron Corporation (NYSE:CVX) or Occidental Petroleum (NYSE:OXY).

However, several other attractive oil and gas stocks to buy are under the radar. The correction provides a good entry opportunity for healthy returns in the next 24 months.

Importantly, oil may trend higher this year and in 2025 due to the possibility of multiple rate cuts. This will trigger a rally for energy and commodity stocks. Further, as global growth accelerates next year on expansionary policies, oil is likely to remain firm.

Therefore, the best oil and gas stocks are poised for a comeback in the coming quarters. Let’s discuss three under-the-radar stocks that deserve a place in your portfolio.

Aker BP ASA (AKRBF)

a gas pipe with the sun going down in the background, naturalSource: Shutterstock

Aker BP ASA (OTCMKTS:AKRBF) is possibly among the best oil and gas exploration stocks to buy and hold. Besides trading at an attractive valuation, AKRBF stock offers a dividend yield of 7.94%. So, expect healthy dividend growth in the coming years.

As an overview, Aker BP has a large portfolio of high-performing assets in the Norwegian Continental Shelf. With a low break-even, these assets are positioned to deliver robust cash flows. Aker reported revenue and EBITDA of $3.5 billion and $3.2 billion respectively in Q3 of 2023, with free cash flow at $1.2 billion. If oil trends higher from current levels, Aker can potentially report annual FCF of $6 to $8 billion.

Additionally, Aker BP has a strong balance sheet with $6.8 billion in liquidity buffer and a low leverage of 0.19. And, the company has grown through mergers and acquisitions in the past. Hence, given the financial flexibility, expect opportunistic acquisitions to add to the strong asset base.

Borr Drilling (BORR)

Production operator communicate between central control room by using radio to operate ball valve at offshore oil and gas processing platform for control gases and liquid crude oil process. Energy Stocks. Bargain energy stocks for JuneSource: Oil and Gas Photographer / Shutterstock.com

Borr Drilling (NYSE:BORR) is a provider of offshore drilling services to oil and gas companies globally. The stock has been largely sideways in the last 12 months. So a strong breakout rally is a possibility on the back of healthy growth.

As of Q3 2023, Borr reported a fleet of 24 modern rigs. Also, the company had an order backlog of $1.87 billion. This provides clear revenue and cash flow visibility. It’s important to note that Borr added $700 million to the queue during the first nine months of 2023. It’s likely that order intake will remain strong considering the positive outlook for oil.

Additionally, Borr Drilling has initiated quarterly dividends of 5 cents. Based on the potential annual pay-out, the dividend yield is attractive at 3%. If revenue growth remains strong coupled with EBITDA margin expansion, dividend growth is likely to be healthy, resulting in stock re-rating.

Flex LNG (FLNG)

oil stocks: stacks of oil barrelsSource: Shutterstock

Flex LNG (NYSE:FLNG) stock looks undervalued at a forward P/E ratio of 12. Further, FLNG stock offers an attractive dividend yield of 9.9%. Dividends are probably sustainable. Considering the valuations, bet on 100% total returns for the stock in the next 24 months.

In short, Flex LNG is a provider of seaborne transportation of liquified natural gas globally. Currently, the company has a fleet of 13 moderns LNG carriers with an average age of four years.

A major reason to like Flex LNG is a strong contract backlog. As of Q3, the company reported a combined backlog of 51 years for its LNG fleet. With extension options, this list can be potentially increased to 77 years. Therefore, clear cash flow visibility exists for dividends.

Notably, the company has no debt maturities until 2028 and debt servicing is unlikely to be a concern. With $429 million in cash and equivalents, fleet expansion is a possibility if the markets remain favorable.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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