Oil penny stocks are among the hottest investments to watch at the moment as coronavirus outspread has deepened oil industry problems. Indeed, the record output cuts from OPEC+ failed to stabilize prices and investor’s sentiments because the steep drop in demand has been weighing on oil prices.
The oil demand dropped close to 25m barrels a day in March with expectations for a similar decline in April. Meanwhile, OPEC and its allies agreed to slash oil production by 9.7m barrels a day that will begin from May and extends to the end of June; the output cut will reduce to around 7m barrels a day through the second half of this year. The US President has also been playing a role in cutting supplies to blaster the prices, aimed at supporting the US oil industry that is providing hundreds of thousands of jobs to Americans.
The oil price selloff has wiped off close to 50% of the value of big oil companies year-to-date while small-cap oil stocks lost up to 90% or more in 2020. Brent crude is currently trading around $30 a barrel while US oil is hovering close to $20 a barrel.
However, oil prices are unlikely to trade in that range over the long-term as demand trends are likely to bounce back once the coronavirus impact fades. The production cuts would also help in strengthening prices and matching supply with demand. Therefore, it’s a perfect time to watch hot oil penny stocks that have the potential to stand taller during the pricing headwinds.
Chesapeake Energy stock price lost close to 90% of value since the beginning of this year on oil price volatility. Its shares are currently trading around $0.13 with the market capitalization of $310m. The massive debt load along with lower oil prices are weighing on Chesapeake Energy stock price performance. Its board has approved a 1-for-200 reverse stock split to comply with the $1/share minimum bid price requirement for listing on the NYSE. The company plans to make asset sales combined with big restructuring actions to face the pricing headwinds and to repay its debt.
Gulfport Energy is a hot oil penny stock to watch because its stock price tumbled close to 75% this year on oil prices and debt crisis. It has $2bn of total debt at the end of the latest quarter while the available liquidity stood at $643m. The company has started looking at the options to service its debt load; Gulfport has started working with Perella Weinberg Partners and its energy advisory arm Tudor Pickering Holt for debt restructuring. Its revenue declined more than 30% in the latest quarter while the net loss came in at $11.36 per share.
Whiting Petroleum also stands among the oil penny stocks to watch because it was once the largest oil producer in North Dakota’s Bakken Shale. The company has recently filed for Chapter 11 bankruptcy protection. It currently has around $585m of cash on hand with $2.9bn of debt that includes a $770m of bond that matures next year. The company also claims that comprehensive restructuring actions will help it in reducing the debt and establishing a more strong capital structure.
Oasis Petroleum turned into a penny stock following the massive share price collapse in the past couple of months. The market analysts have downgraded Oasis ratings following the oil price slump in the last two months. Piper Sandler equity researchers provided an “Underweight” rating from earlier “Neutral” ratings. JP Morgan has also dropped OAS shares to “Underweight” rating. Its upcoming debt maturities and negative free cash flow generation could create problems for the company.
SM Energy shares price fall of 80% this year has forced the company to slashed its dividend by 80% to save cash in the wake of lower oil prices. Its oil production accounted for 45% of fiscal 2019 total production of 48.3 MMBoe. The company had generated more than $800m in operating cash flows last year which helped it in dropping net debt-to-adjusted EBITDA to 2.8 times.