Is Energean Plc (LSE: ENOG) the best stock in an Oil boom?
Stock Ticker for Energean Plc
Stock Name and Trading Stock Exchange Platform
Energean Plc – London Stock Exchange (LSE: $ENOG)
– Tel Aviv Stock Exchange (TASE: $ENOG)
– FTSE 250 (MCX: $ENOG)
Stock Sector for ENOG
Energean is a multinational independent hydrocarbon exploration and production corporation focused on natural gas.
It operates in the Mediterranean Sea and has strategic assets and leases in the middle east in Israel and the UK North Sea.
It is based in London and headquartered in the same, directly employing a staff of over 600 personnel.
ENOG initially started as Aegean Energy in 2007 and purchased Eurotech Services, marking the beginning of its operations.
Recent Most Important News on ENOG
Energean is facing disputes in its Israeli gas field (typical in the industry) which has culminated in an international conflict between Israel and Lebanon, the latter making allegations of encroachment in contested waters.
The US in its usual fashion is sending a delegation for inquiry on the offshore field, hoping to mediate a peaceful agreement.
This political risk, if severe, is detrimental to the corporations involved. ENOG is heavily invested in Israel and hopes to stay in the safer zones.
Good news has finally arrived for ENOG shareholders, who have long-awaited for the company to turn profitable.
This explorer has posted a ‘surprise profit’ in the latter half of the year according to analysts’ estimates.
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This has spurred renewed vigor in ENOG, only similar to when it commenced operations.
Its share price has greatly benefitted from a spike and short interest on the stock has subsequently declined by an amazing 21.4%.
The burgeoning hydrocarbon industry is responsible for the great figures recorded.
If this holds up to next year, ENOG will be a haven for investors. It is already promising a ‘maiden dividend’ following the prospective profit window.
In collaboration with Alpha Petroleum and Orsted, the driller has signed an MoU for repurposing the Wenlock gas platform (from offshore wind) in the UK Southern North Sea.
This comes as an Energy crisis ensues, with record inflation and an all-time low pound.
Current Position of ENOG
ENOG boasts of a fairly huge market capitalization in the region of £2.4B. it is ranked as a component in the FTSE 250. It has been on a falling trend since the 2020 collapse until the recent turn of events.
Although the pandemic was a terrible period for most Oil drillers with many going under and filling for Chapter 11, ENOG managed to remain afloat, expanding its operations.
It currently has a presence in several countries along the Mediterranean including Israel, Egypt, Italy, Greece, Montenegro, Croatia, and the UK.
The company is focused on achieving net zero and is a signatory of the UN global compact agreement.
ENOG announced in June the completion of its exercise to drill activity and will further engage in exploring two more wells with Stena Drilling.
Its operations in Israel seem to be by far the most demanding, with over $170M of capital used in developing assets in the country.
Its ‘flagship development assets’ include Karish North and Tanin fields, Offshore Israel.
It has additionally acquired a 30% stake of Kerogen’s holding in Energean Israel limited (EISL) and now owns 100% of the subsidiary.
Immediately after, ENOG completed its acquisition of Edison E&P, which placed it in a well-capitalized position.
The team at Energean has a wealth of experience in the industry and is looking to merge both fruitful explorations with eco-friendly methods.
The CEO Mr. Mathios Rigas is a founding shareholder, and a petroleum engineer with experience in investment banking.
Gross consideration is therefore given to both the technical knowledge and economics of its projects. Other executives hail from multinationals like Shell, Standard Chartered & Maersk.
The Eastern Mediterranean is particularly a hotspot for hydrocarbons with a high concentration around Israel and Egypt.
The petroleum geology of the region reveals that Levant sandstones and Herodotus carbonates are rich reservoir rocks.
Natural gas discoveries are more frequent in the region, with sizeable oil reserves identified as well.
Exploration efforts are actively ongoing and corporations like Total, EMG, and Kogas competing in the action.
ENOG has a foothold in offshore hydrocarbons and is well-equipped with state-of-the-art drilling rigs and offshore platforms.
The Mediterranean region is believed to be formed in the Paleozoic era and contains ‘hot shale’, source beds, and traps containing hydrocarbons.
The demand for gas is sky high and the Mediterranean region is forecasted to supply a huge percentage to the world as the Persian Gulf reserves become overburdened.
ENOG sees an opportunity of a lifetime in the region which could be the next big find that allows for the smooth energy transition.
The company is tactical in reducing its carbon footprint and is poised to cut emissions by 85%. By the end of the decade.
It still faces regulatory risk, which is being handled, it is otherwise a quantum leap.
ENOG Stock Price Chart
Market chartists would describe the pattern above as ‘moderately volatile with a bullish uptrend’. ENOG currently trades at 1351p, pre-market, in the last week of September 2022.
Oil is still king in the second half of the year, even with a slight drop from north of $100 to now hovering around $78.
Petroleum producers are still enjoying a home run that is likely to continue in the future.
The stock has recently tumbled as the price of crude went lower. It is red by -8% in the past week and -4.7% in the past month.
Over the years, ENOG is positively up by +48.7% year-to-date. It is also in the green by +15% in the past 6 months.
The stock price is very justified as it is nearly at par with the Brent crude Index.
Sentiment on ENOG
Volatility is no stranger in the Oil markets and the latest downtrend proves just that. Recessionary fears have gained momentum with falling oil prices.
An article by the Washington Post captures the state of the market quite accurately in a statement that says:
Oil markets are volatile but not broken.
A more worrying concern is the state of affairs in the home country of the company, the UK.
The resistance to Oil exploration by organizations like Greenpeace, coupled with the cut-off from Russian gas has left the country in a quagmire.
The price of electricity and the cost of living is generally tied to gas prices. ENOG pushes for Energy security and has operations in regions where this is appreciated.
The Lebanese also pose a threat to continued operations, the Israeli Military has offered protection for its vessels, but the outcome is uncertain, considering the region is terrorized.
Pros and Cons of ENOG
The perfect storm is finally here, and it appears we are in an ‘everything bubble’. Crude oil is the final frontier that has held up the markets.
Thus, its price action in the coming months will be very decisive.
Pros of Investing in ENOG
– Experienced Offshore Operator
– Strong track Record
– Strategic Location in Hydrocarbon Hotspot
– International partners and Investors.
Cons of Investing in ENOG
– Geopolitical tensions
– Massive selling action
Profits for ENOG
Energean has shown signs of breaking even and heading for a profit run in their latest reports. Results were posted on June 2022, the metrics looked very assuring.
Revenue for the quarter was penned at $169.48M, rising by a solid +64.9% YOY. Operating expenses increased by +11.56% YOY, recorded at $14.36M.
The net income rose by a staggering +433.99% YOY, coming in at $59.37M. The net profit margin similarly exploded by +302% over the year, registered at 35.03%.
Diluted EPS boomed by +430%, valued at 0.33. EBITDA was posted at $90.22M, going up by +163.7% in the past year.
The balance also appears to be pretty lean, with the Total assets estimated at $5.54B, an increase of +4% over the year.
The company is well leveraged, some might say overleveraged, with a debt-to-equity ratio of 3.7. Debt is still money even with the hike in interest rates.
Cash from operations increased by +176% over the year and was recorded at $73.28M. Free cash flow increased by +22.83 % and was valued at -$47.07M.
Hydrocarbon exploration requires mountains of capital therefore, virtually all its cash reserves are invested in pursuing new wells, leasing, and operating rights.
As long as oil remains the essential commodity it is today, ENOG will be thriving. Experts have warned that crude could go even higher if production targets are not met.
The shutting down of pipelines in the US (Keystone XL) & Europe (Nord Stream 1) will have a devastating effect that will keep up the price.
Fuel prices are still at an all-time high despite the slipping price of Crude Oil. Energean has therefore positioned itself to benefit, irrespective of the price swings.
Growth Likelihood and Potential for ENOG
ENOG is still relatively undervalued compared to the sector averages. The turn to profitability to see the stock go to the moon if kept up.
It is a marvelous growth opportunity in these uncertain times. Even in a market crash demand for crude will still exist, following a deficit in production.
An impending disaster threatens the operations of the company, in the form of border disputes.
Both sides have been very vile regarding the other and none is willing to concede.
Protests are taking place in the Karish gas field by Lebanese who stand firm on the decision. Palestinian flags were also present in the riot.
Lebanese territory is known for being in cahoots with Iran and thus harbors multiple militia groups. An all-out war could be terrible for business.
ENOG prides itself in effective risk management and will find a way to avert danger regardless of the circumstances.
We are still below pre-pandemic levels, and a shortfall persists. Winter is coming and seems to be lethal without the gas for warmth.
Due to the severe shortage, most countries are utilizing hydrocarbons for local consumption and not production. Gas in particular will spike due to this.
ENOG has a preference for natural gas over Oil and so does the Israeli landscape.
Development and production are needed in mass to stabilize the economy and meet the needs of the population.
ENOG is a triple return at best and a double at worst, over the next decade.
Overall verdict on ENOG
The price target for the driller has been upgraded by many financial firms. Analysts estimate a High of $177 and an average of $151 in the next year.
With a keen eye on sustainability, the company will likely be around in the future and find a way to remain a clean energy producer.
With the company now achieving ‘break-even’, a swarm of capital will be sure coming it is way as investors look for a store of value.
The high debt it has keeps it on its feet and forces astute management of capital. The Upstream sector is very exciting than it has been before, and this grace period is astounding
This stock is not only a hedge in present times but a neat gainer in the not-too-distant future. Petroleum is the best performing sector this year and is still promising.
Moving averages indicate a strong buy while Oscillators are neutral based on a 30-day timeframe.
Declining short interest could mean a short squeeze, which could drive the price up further.
The stock is an overall ‘strong buy’ and will be a victor in the long run.
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