Oil prices tumbled below the $100 mark last week as the rising recession worries raised concerns about lower demand for petroleum products. Moreover, Ritterbusch and Associates attributed the move to “tightness in global oil balances increasingly being countered by strong likelihood of recession that has begun to curtail oil demand.”
Moreover, gas prices declined to $4.78 per gallon last Wednesday, down 24 cents from its highest-ever level of $5.016 in June, while oil prices plunged 2% to a 12-week low. Energy prices could remain volatile amid the Fed’s tightening monetary policies and the rising recession concerns.
Given the declining energy prices, fundamentally weak oil & gas stocks, Houston American Energy Corp. (HUSA), NextDecade Corporation (NEXT), and Tellurian Inc. (TELL), which currently look bloated, could be best avoided.
Houston American Energy Corp. (HUSA)
HUSA, an independent oil and gas company, engages in the exploration, development, and production of natural gas, crude oil, and condensate in the United States. Its oil and gas properties are located in the Texas Permian Basin, onshore Texas and Louisiana Gulf Coast region, and the South American country of Colombia.
HUSA’s oil and gas revenue came in at $423,820 for the quarter ended March 31, 2022, up 29% year-over-year. However, its cash came in at $4.77 million, down 9.6% year-over-year. Also, its total other income came in at $231, down 97.8% year-over-year.
HUSA’s trailing-twelve-months P/S of 28.84x is higher than the industry average of 1.45x. Its trailing-twelve-months P/Book of 4.02x is 122.1% higher than the industry average of 1.81x.
Over the past month, the stock has slumped 45.1% to close the last trading session at $4.14.
HUSA’s POWR Ratings reflect its poor prospects. It has an overall grade of F, which indicates a Strong Sell. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has an F grade for Value and Quality and a D for Stability and Sentiment. Click here to access the additional POWR Ratings for HUSA (Growth and Momentum). HUSA is ranked #96 out of 97 stocks in the Energy - Oil & Gas industry.
NextDecade Corporation (NEXT)
NEXT engages in the development activities related to the liquefaction and sale of liquefied natural gas (LNG); and capture and storage of CO2 emissions. The company focuses on the development activities of the Rio Grande LNG terminal facility, a carbon capture and storage project (CCS project) at the terminal, and other CCS projects.
Stifel Nicolaus recently downgraded NEXT from a “hold” rating to a “sell” rating.
NEXT’s total operating loss increased 216.7% year-over-year to $5.13 million for the quarter ended March 31, 2022. Its net loss came in at $17.19 million, up 127.7% year-over-year, while its loss per share came in at $0.14, up 133.3% year-over-year.
NEXT’s forward P/B of 4.87x is 178.7% higher than the industry average of 1.75x.
NEXT’s EPS is expected to remain negative in 2022. Its EPS is estimated to decrease 21.9% year-over-year to negative $0.39 in 2023. Moreover, it has missed EPS estimates in three of the four trailing quarters. The stock has declined 27.8% over the past month to close the last trading session at $5.16.
NEXT has an overall F grade, equating to a Strong Sell in our POWR Ratings system. Also, it has an F grade for Growth and Value and a D for Sentiment and Quality.
Click here to access the NEXT ratings for Momentum and Stability. It is ranked #95 in the Energy - Oil & Gas industry.
Tellurian Inc. (TELL)
TELL engages in the natural gas business worldwide. The company is developing a portfolio of natural gas production, liquefied natural gas (LNG) marketing, and infrastructure assets. It owns interests in 11,060 net acres of natural gas assets and 78 producing wells.
For the quarter ended March 31, 2022, TELL’s total revenue came in at $146.94 million, up 1,587.8% year-over-year. However, its net loss came in at $66.61 million, up 146.8% year-over-year, while its loss per share came in at $0.14, up 75% year-over-year.
TELL’s forward EV/S of 3.05x is 75.1% higher than the industry average of 1.74x. Also, its forward EV/EBITDA of 49.53x is also higher than the industry average of 5.71x.
TELL’s revenue is expected to decrease 15.9% year-over-year to $252.93 million in 2023. Its EPS is expected to remain negative in 2022. In addition, its EPS is expected to decline 64.3% year-over-year to negative $0.23 in 2023.
Also, its EPS is expected to decline by 22.1% per annum for the next five years. Over the past month, the stock has lost 27.9% to close the last trading session at $3.11.
TELL’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. In addition, the stock has an F grade for Value, Stability, and Quality and a D grade for Sentiment.
We also have graded TELL for Growth and Momentum. Click here to access all of TELL’s ratings. It is ranked last in the same industry.
HUSA shares were trading at $3.87 per share on Monday morning, down $0.27 (-6.52%). Year-to-date, HUSA has gained 170.63%, versus a -18.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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