The price of West Texas Intermediate (WTI) crude oil has risen dramatically in 2024. That has set the stage for strong performance from the energy sector this year. It also sets the stage for penny oil stocks to rise dramatically as Middle East tensions ratchet higher.
The energy sector has been a particularly strong performer this year. According to Charles Schwab, it is expected to continue to outperform the market overall. Oil prices are surging as I write this article. Israel has launched missile strikes against Iran. The result was that per barrel oil prices spiked by $3 on the day. It also sets the stage for further escalation that promises to raise prices higher yet again.
That combination of factors makes penny oil stocks particularly attractive. Penny stocks in general have high potential to produce outsized gains — those in the oil sector look particularly strong at the moment.
Baytex Energy (BTE)
Baytex Energy (NYSE:BTE) is one option in penny oil stocks to consider. The company explores, develops and acquires oil and natural gas properties in Canada and the United States.
Baytex Energy develops oil and natural gas properties primarily in Texas and Alberta. This stock makes particular sense given that the company increased production by 16% in 2023. that production was overwhelmingly crude oil based. The company’s daily production was 85% crude oil and 15% natural gas.
In other words, Baytex Energy is well positioned to take advantage of rising oil prices at the moment. The company’s strong production metrics were also above guidance. It is yet another piece of evidence suggestive of the investment worthiness of a BTE shares overall.
Otherwise, the company also invests 50% of a free cash flows into shareholder returns. Overall, Baytex Energy strikes me as a well-run firm that is particularly well positioned as oil prices spike.
The consensus opinion is that BTE shares should more than double over the next year.
Kosmos Energy (KOS)
Kosmos Energy (NYSE:KOS) won’t release its Q1 results until early May, but I expect they’ll be strong. There are currently multiple reasons to consider investing in the oil penny stock.
First of all, institutional interest in Kosmos Energy is currently strong. Several prominent institutional investors have recently increased their stake in KOS shares substantially. That suggests that those firms see a potential price bump upcoming in early May. Institutional investment activity is a strong indicator of price direction. Such firms have substantial resources with which to influence the market. Those recent moves should increase investor confidence in KOS shares as bullishness increases in the energy sector overall.
Another positive factor to note is that Kosmos Energy is becoming more efficient. The company has recently been able to increase the return on capital employed. Those higher capital returns should trickle down and manifest as higher share prices. It is another relatively inexpensive oil stock with the potential to rise by 50% or more.
Amplify Energy (AMPY)
Amplify Energy (NYSE:AMPY) released earnings in March showing strong performance. That is a primary reason to consider investing in the inexpensive oil stock.
The company reported revenues of $78.99 million whereas Wall Street had expected $76.22 million. Although the 3.6% beat was impressive, it was in earnings that the company truly shined. Analysts had expected Amplify Energy to provide earnings per share of 18 cents. Instead, the company provided an EPS of $1.07 in the period.
Consider investing in Amplify Energy as it leans into stronger prices moving forward. The company managed to derive $43.6 million of net income at per barrel oil prices near $78 during Q4. Prices have since increased suggesting that Amplify Energy’s upcoming earnings will potentially move higher again.
The forecast price range for AMPY stock is tightly bound, ranging from $9 at the low end to $9.50 at the high end. That’s fairly reassuring given that shares currently trade for $6.75. It implies that there is very little volatility moving forward within the expectation of strong returns.
On the date of publication, Alex Sirois did not have (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.