Vista Oil & Gas (VIST), Vaalco Energy (NYSE:EGY), and Geopark (GPRK) are 3 oil & gas stocks that are trading at very cheap valuations. This means that if energy prices keep trending higher, these stocks have considerable upside.Energy has been one of the best-performing assets so far this year. YTD, oil is up 51%, while natural gas is up by 36%. Both have reversed all of their losses following steep declines upon the onset of the coronavirus in February and March of 2020 and are now approaching 5-year highs.
Despite these gains, we are still not seeing a meaningful supply response. CAPEX in the sector has been trending lower since 2015 and completely collapsed during Covid. This past weekend, OPEC couldn’t agree on supply increases. At the same time, demand has been quite strong despite restrictions and reduced economic activity in some parts of the world. Based on the experience of countries that are leading in vaccinations, demand will only increase as case counts drop.
Therefore, it’s likely that oil’s bull market continues, until we start to see a significant supply response. The biggest opportunity may lie in very cheap, small-cap energy stocks such as Vista Oil & Gas (VIST), Vaalco Energy (EGY), and Geopark (GPRK), which could have the most upside if energy prices keep trending higher.