Oil prices are soaring! The WTI oil price is US$97 and change per barrel. The Brent oil price, which tends to trade at a premium, has broken through US$100 per barrel. Even the WCS oil price is at US$77 and change per barrel.
Many energy stocks have soared as a result. Some investors think it’s too late to buy energy stocks. That may be the case for large-cap stocks like Canadian Natural Resources, Suncor Energy, Enbridge, and TC Energy, which have little upside potential in the near term after investors flocked to them. However, solid mid-cap energy stocks still have room to run.
Here are a couple of mid-cap energy stocks you should consider in March!
Whitecap Resources stock
At writing, Whitecap Resources (TSX: WCP) stock trades at $9.67 per share and offers a yield of 2.7%. It has a market cap of about $6.1 billion. Its trailing 12-month revenue was almost $2.7 billion. As well, it generated solid operating cash flow of $1.1 billion, while paying out only $126 million in dividends in the period. Capital expenditure was $559 million, resulting in substantial free cash flow of over $564 million, which was more than double the levels in 2019.
Earlier this month on BNN, Bill Harris, who’s a chartered financial analyst (CFA), provided some insights on Whitecap Resources stock:
“Second-tier. Benefitting from the commodity cycle. Great recovery so far, but these stocks are still relatively inexpensive. He owns [ARC Resources], but WCP could easily have been comparable. Enthusiasm for energy is just starting. Anticipates an easy 50% out of these Canadian mid-cap producers.”
Bill Harris, partner and portfolio manager at Avenue Investment Management
According to Yahoo Finance, the analyst consensus 12-month price target is $12.09, which represents near-term upside potential of 25%.
Parex Resources stock
Parex Resources (TSX: PXT) is another cheap energy stock that can trade much higher. At writing, it trades at $27.95 per share with a dividend yield of 2% and a market cap of approximately 3.3 billion.
The oil-weighted producer’s trailing 12-month revenue was US$909 million. In addition, Parex Resources generated solid operating cash flow of US$445 million. After subtracting the capital expenditures, it had substantial free cash flow of over US$274 million.
Brian Madden commented on Parex Resources as his top past pick on BNN in January 2022, at which time PXT stock traded at about $24.30 per share.
“Parex has more in the tank. It’s distinct because all assets are in Colombia. Production has grown considerably. Cash flow has grown more than production. Hyper-focused on profitability. Debt free. Hundreds of millions of cash on the balance sheet. Buys back shares. Enacted a dividend. Great management, valuation, and entry point.”
Brian Madden, senior vice president and portfolio manager at Goodreid Investment Counsel
Indeed, Parex is debt-free. It last reported having cash and cash equivalents that covered its total debt with leftovers. Its cash minus its current liabilities leaves cash on hand of $160 million.
At current levels, according to Yahoo Finance, the analyst consensus 12-month price target on PXT stock is $37.02, which represents near-term upside potential of 32%.
