Analyst Predicts $150 Oil, These Newsmakers Benefit (HNRC, RIG, FTI, HLX, TGA)

Investors sometimes lose sight of long term trends by following the noise of the 24 hour news cycle.  Some investment journalists would have you believe its doom and gloom for energy prices after some pull back in the sector recently.   However, Truist managing director of energy research, Neal Dingmann told Yahoo Finance Live  the supply shortfall resulted from the ban on Kremlin’s natural gas could bump crude prices “well over $150” per barrel.

“I think you are going to see supply upended, if not at the end of the year, if not before. I think that has the potential to cause oil prices to even spike higher than what we just saw a couple months ago.”

Dingmann predicted gas prices could rise “potentially 50%” if the U.S. doesn’t have an alternate source for Russian oil.  According to Dingmann that is not likely because America “certainly” does not have the ability to expand domestic oil production. 

Some of the pullback in energy equities could be due to how high they ran up earlier this year.   However, there is one energy stock in the news yet to gain a major following, that could be considered extremely undervalued.

Houston Natural Resources Corp. (OTCMKTS: HNRC) has net assets that indicate a company worth $2.39/share…the stock currently trades under $0.20/share.

HNRC’s TTM EPS is $0.27.   Rarely do you see stocks trading below EPS, and energy stocks trade at a PE of 17.8.   At that ratio, HNRC would be $4.80 per share.

HNRC’s latest news, however, points to a company that is certainly undervalued.  HNRC announced it will be spinning off its Non-Energy Assets into a separate company.  Due to the size of these assets ($53 million) the company expects an opening share price of around $5.  In the terms of the spinoff HNRC shareholders of record prior to the end of Q3 will receive $1.75 worth of equity in the new company for every HNRC share they own.

The spinoff dividend alone would pay a triple-digit premium on shares at this price.   HNRC investors can expect value from not only the dividend, but the growth of its remaining energy-focused assets.

So if investors were to purchase shares today at 20 cents, they would realize massive price gains on the dividend.   This is of a stock that could be $2.39 based on book value, and $4.80 based on earnings.  Any way you slice it, investors would be wise to start research on HNRC.

HNRC was not the only energy penny making massive news, after a long 8 year wait, Transocean Ltd. (NYSE: RIG) made history summer by accepting delivery of the world’s first eight-generation drillship, Deepwater Atlas.  This is the first of two ultra-deepwater drillships built for RIG by Singapore-headquartered shipbuilder, Sembcorp Marine.  Deepwater Titan is the second one.

The commissioned drillships have the ability to accommodate 20,000-psi (pounds per square inch) drilling and completion operations. As of now, the drillship has a 15,000-psi blowout preventer.

In 2014, RIG ordered both of these behmoth drillships for a total cost of $1.8 Billion.  However, until now had been anxiously awaiting the arrival of these rather large investments.  After several postponements, Atlas has finally arrived, RIG now awaits Titan, and investors are monitoring the situation.

TechnipFMC (NYSE: FTI) announced a major LOI with Equinor ASA subsidiary, Equinor Energy do Brazil Ltda..  The agreement is on a jointly operated integrated Front End Engineering and Design (iFEED™) study on its BM-C-33 project offshore Brazil.

The study will finalize the technical solution for the proposed gas and condensate greenfield development in the pre-salt Campos Basin before Equinor makes its final investment decision (FID).

Jonathan Landes, President, Subsea at TechnipFMC, said of the agreement: “We are excited about this iFEED™ award, which demonstrates our collaborative relationship with Equinor and their continued confidence in our technologies and integrated approach. This integrated project will be the first time Equinor uses our Subsea 2.0™ configure-to-order production systems, of which we’re seeing increased customer adoption.”

Another energy company making deal news, Helix Energy Solutions Group, Inc. (NYSE: HLX) announced the successful completion of its acquisition of all of the equity interests of the Alliance group of companies, expanding its decommissioning presence in the Gulf of Mexico shelf.  

Helix, an international offshore energy services company that provides specialty services to the offshore energy industry, with a focus on well intervention and robotics operations, also advanced its (ESG) environmental, social and governance initiatives by responsibly supporting end-of-life requirements of oil and gas projects.

HLX also announced that with the acquisition of Alliance, it has amended an existing asset-based revolving credit facility, expanding the eligible credit line and establishing a link in its pricing to sustainability targets.  This will include:

Increase of the size of the ABL Facility to $100 million; and
Inclusion of ESG/sustainability-linked performance targets that may result in adjustments to commitment and borrowing rates.

Owen Kratz, President and Chief Executive Officer of Helix, said of the deal, “We are pleased to have completed our acquisition and added Alliance to the Helix family, which complements Helix’s existing deepwater abandonment offerings by adding shelf and facility abandonment capabilities and significantly enhances our position as a full-field abandonment services provider. The acquisition marks a meaningful step in our participation in the Energy Transition, and we are excited to welcome our new colleagues to the Helix family.”

TransGlobe Energy Corporation (TSX: TGL) (NASDAQ: TGA) recently treated investors to an operations update.  Highlights included; average production of 12.1 MBoepd in Q2, full Canadian production restored in May which led to June production in Canada to average 2,727 boed.  However, this production will be shut in temporarily to protect the stimulation operations on the adjacent new wells.

TGA also announced a couple Q2 drilling highlights.  The company drilled two 100% working interest 2-mile horizontal Cardium reservoir development wells during in Canada.  The company also drilled and cased four Egypt Eastern Desert development wells.  At its Egyptian operation the company sold a ~451 Mbbl cargo of Egypt entitlement crude oil for proceeds of ~$46 million.

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