The Motley Fool

This energy growth monster has completely thrashed the BP share price

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.

Dial being turned up to 'high'
Image source: Getty Images.

US-based gas and oil producer Diversified Gas & Oil (LSE: DGOC) is up 4% today after delighting investors with a strong set of results, including a near sixfold increase in revenues to $58m.

Nicely Diversified

The AIM-listed £585m group, which has a focus on the Appalachian Basin, is up 52% in the past year, and today’s results for the six months to 30 June suggest the momentum could continue.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

It has materially increased production through acquisitions, including Alliance Petroleum for $80.7m in March, $89.3m of conventional assets from CNX Resources in April, and $575m of gas, oil and midstream assets from EQT Corporation (the largest acquisition by an oil and gas company in the history of AIM).

Right balance

Average daily production was 19.3 kilo barrel of oil equivalent (kboed) over the period, hitting 60 kboed in post-period July. It also revealed strong adjusted EBITDA margins of 40% and “significantly strengthened balance sheet and liquidity”, with $439m of new gross equity raised. It now has an enlarged credit facility of $1bn, with a $600m committed borrowing base. Overall, it has a strong liquidity position of $187m.

CEO Rusty Hutson hailed a period of transformative growth” with acquisitions boosting production by more than 90% without risking the balance sheet. He said the real impact of the group’s “game-changing acquisitions” are still to come, in materially increased cash flow, lower costs and enhanced EBITDA margins.  

Diversified will start paying dividends in September and City analysts forecast a yield of 7.4% for 2018, and 8.3% for 2019, alongside whopping earnings per share (EPS) growth of 28% this year, and 86% in 2019. A lot can go wrong with AIM-listed energy explorers but this looks an intriguing option.

Big and beautiful

At the other end of the size scale, £109bn energy titan BP (LSE: BP) has also been having a good year, its share price up 21%. It’s been given a fair wind by the recovering oil price, with Brent crude currently hovering around $80bn on latest Iran concerns and Hurricane Florence fears.

I was intrigued by a bullish report on Big Oil from analysts Berenberg yesterday, which hailed BP a buy with a target price of 665p, suggesting a 20% uplift from today’s 550p, if you trust in these things.

Lower costs, growing output and higher crude oil prices should all help drive BP’s free cash flow, while cost-cutting when crude dipped below $30 is now paying off handsomely. Don’t forget that BP quadrupled its second-quarter profit in the year at the end of July, and increased its dividend for the first time since 2014.

Ultimate BP

There are the inevitable strategic uncertainties as the world looks to shift away from fossil fuels, with a new report from the Carbon Tracker Initiative suggesting oil demand could peak as early as 2023. But you cannot set too much store on these arguments, as anyone who remembers the frenetic Peak Oil debate knows.

You can set store on BP’s 5.7% yield, though, combined with a forecast valuation of just 12.5 times earnings. EPS are forecast to rise to 222% this year, then 12% in 2019. I recently described BP as my ultimate FTSE 100 long-term buy and hold and see no reason to change that view today.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

harveyj has no position in any of the 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.