Why Pantheon Resources plc is a high-growth stock you might regret not buying

The outlook for Pantheon Resources plc (LON: PANR) appears to be positive.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The performance of the oil and gas sector has been hugely volatile this year. After significant optimism in the early part of the year, the oil price disappointed significantly. However, after gains in recent months, it reached a two-year high. This means that the outlook for oil and gas companies has generally improved and could mean they are worthy of higher valuations.

With that in mind, now may be a good time to buy Pantheon Resources (LSE: PANR). That’s especially the case since the exploration company reported positive news last week.

Improving outlook

On Thursday, the company announced that the VOBM#4 well has reached its target depth of 12,050 feet. In doing so, it encountered the Wilcox horizon. This was a welcomed bonus for the company and has the potential to be hugely successful given its 75% working interest in the well. The wellbore is currently being prepared for logging operations, while the gas facility is progressing as expected. Higher production rates are anticipated as the wells clean up in future.

Looking ahead, the stock is expected to move from five years of losses to a profit in the next financial year. It’s forecast to record pre-tax profit of over £5m, which puts it on a forward price-to-earnings (P/E) ratio of 25. While not exactly a low rating, the company appears to have significant growth potential, not just from its improving operational performance, but also from the prospect for a rising oil price.

Although the level of supply over the medium term may be uncertain, various oil-producing countries have indicated that may be supportive of a higher oil price. Therefore, Pantheon Resources could see its profit rise, which may make its current valuation seem attractive over the long run.

Turnaround complete?

Also set to deliver a black bottom line after a troubled period is resources sector peer Glencore (LSE: GLEN). The company has experienced three years of losses in the last five, which is clearly disappointing for its investors. However, after a major cost-cutting programme that has left the company with lower leverage on its balance sheet, it’s expected to move into profit in the current year.

Despite this, Glencore continues to trade on a relatively low P/E ratio. It currently stands at 12.1 on a forward basis, which suggests that it may be cheap when compared to some of its sector peers. And with its financial and operational performance on the up, it may be much easier for investors to justify a higher valuation. This could act as a catalyst on the company’s future share price performance.

Clearly, commodity prices could be volatile over the medium term. However, with what appears to be a wide margin of safety and a lower-risk business model after its debt reduction plan, Glencore could be a worthwhile investment for the long term.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »