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Two Small-Cap Energy Stocks Primed for Growth Venturing into the Energy Frontier: Two Small-Cap Energy Stocks with Potential

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  Venturing into the Energy Frontier: Two Small-Cap Energy Stocks with Potential

The energy landscape, dominated by the prosperous Permian Basin, continues to captivate the imagination of the energy industry in 2024. Last year, major players Exxon Mobil (XOM) and Chevron (CVX) made substantial waves in the region, and now Diamondback Energy (FANG) has set its sights on the acquisition of privately owned Endeavor Energy Partners in a deal valued at $26 billion.

This deal will position the combined entity as the third-largest producer of oil and gas in the Permian Basin, trailing behind Exxon and Chevron. The former acquired Pioneer Natural Resources (PXD) while the latter agreed to purchase Hess (HES), in deals totaling $59.5 billion and $53 billion, respectively.

As the region remains ripe for consolidation in the energy sector, let’s explore two small-cap energy stocks with Permian assets that have caught the attention of Wall Street analysts.

1. Northern Oil and Gas Stock

Northern Oil and Gas (NOG) is an independent energy company involved in the acquisition, exploration, development, and production of natural gas (NGH24) and crude oil (CLH24). The firm’s lower-cost business model includes holding non-operating stakes in oil and gas wells that are operated by other producers. With primary operations in the Williston, Permian, and Appalachian basins, NOG has a market cap of $3.42 billion.

The company recently announced a dividend of $0.40 per share, an 18% increase YoY, with the stock currently yielding 4.69%.

Over the past 52 weeks, Northern Oil and Gas stock has gained 4.6%, roughly in line with the S&P 500 Energy Sector SPDR (XLE).

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The company reported its Q4 2023 production update last week, with volumes up 12% sequentially from Q3. For 2024, NOG is targeting roughly 20% annual production growth at the midpoint.

NOG’s full Q4 earnings report will be released after the market closes this Thursday, Feb. 22, with analysts expecting EPS of $1.71, on average.

Northern Oil and Gas stock has a consensus “Moderate Buy” rating from analysts, with the mean price target of $46.96 signifying an upside potential of 40% to current levels. Among the 13 analysts tracking the stock, 9 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 2 have a “Hold” rating, and 1 has a “Moderate Sell” rating on the energy stock.

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2. Atlas Energy Solutions Stock

Atlas Energy Solutions Inc. (AESI) provides high-quality proppant and oilfield services, specializing in offering “last mile” logistics to oil and gas producers operating primarily within the Permian Basin. AESI is valued at $1.79 billion by market cap, and the stock is up more than 6% YTD.

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During the last earnings report on Oct. 30, Q3 results were mixed. Revenue increased 1.7% YoY to $157.6 million, surpassing estimates, but EPS of $0.55 fell short of the consensus forecast. Adjusted EBITDA rose to $84.1 million, with adjusted free cash flow at $68.5 million. The company’s Q4 earnings report will be released on Feb. 27, with Wall Street expecting EPS of $0.61.

Earlier this month, Atlas raised its quarterly dividend payment by 5% to $0.21 per share, resulting in a forward yield of around 3%.

Analysts view AESI optimistically, with a consensus “Strong Buy” rating and a mean price target of $24.00, representing a 31% premium to current levels. Out of the 10 analysts tracking the stock, 9 have a “Strong Buy” rating, while 1 has a “Moderate Buy” rating.

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On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.