Enerflex Means Drill Baby Drill

Oceaneering International, Inc. OII and Infinite Acquisitions Partners LLC recently announced that they have entered into a nonbinding Letter of Intent (LOI) to acquire Oceaneering Entertainment Systems (OES) from OII through the purchase of assets.

Infinite Acquisitions also entered into a nonbinding LOI with Falcon’s Beyond Global, another leader in themed entertainment and immersive storytelling, to operate OES.Infinite Acquisitions holds a majority stake in Falcon’s Beyond.

An Insight Into OII’s Entertainment Arm

OES has been an award-winning leader in the entertainment and show equipment industry for 25 years and is known for developing world-class theme parks, complex rides and show systems.

OES and Falcon’s Global have teamed up to develop several theme park projects globally over the last two decades. As the owner of OES, Infinite Acquisitions would use Falcon’s Beyond’s proficiency to develop several future-forward rides and theatres and retain key OES employees to operate the company efficiently.

Strategic Impact and Future Growth

Infinite Acquisitions states that Falcon’s expertise in the entertainment industry makes it a great fit to operate OES and further amplify its brand name.

The strategic move would boost Falcon’s Beyond’s goodwill as a world-class entertainment provider. The company, upon completion of the transaction, plans to continue with the existing OES’ customers, providing them with the same high-quality service.

Currently, the transactions between Infinite Acquisitions, OII, OES and Falcon’s Beyond are nonbinding and under discussion and will be finalized upon due diligence; therefore, there is no assurance that a binding agreement for the transactions will be executed.

OII’s Zacks Rank and Key Picks

Houston, TX-based Oceaneering International is one of the leading suppliers of offshore equipment and technology solutions to the energy industry. Currently, OII has a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at some better-ranked stocks like Mach Natural Resources LP MNR, Enerflex Ltd. EFXTand Targa Resources Corp. TRGP. While Mach currently sports a Zacks Rank #1 (Strong Buy), Enerflex and Targa Resources each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mach Natural Resources LP is an independent upstream oil and gas company that focuses on acquiring, developing and producing oil, natural gas and natural gas liquids reserves. The Zacks Consensus Estimate for MNR’s 2024 earnings indicates 200% year-over-year growth.

Canada-based Enerflex provides oilfield services for natural gas and petroleum producers. EFXT’s expected EPS (earnings per share) growth rate for the next quarter is 166.67%, which compares favorably with the industry loss of 23.09%.

Houston, TX-based Targa Resources is a premier energy infrastructure company and a leading provider of integrated midstream services in North America. The Zacks Consensus Estimate for TRGP’s 2024 earnings indicates 70.22% year-over-year growth.

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Shell plc SHEL is signaling a strategic shift by selling some of its carbon projects portfolio as the carbon offset market faces challenges. The strategic move aligns with the CEO, Wael Sawan’s focus on fossil fuel energy that provides higher returns.

Although the company once aimed for significant growth with these low-carbon projects, it now wants to shift away from operations that don’t provide a strategic advantage and premium returns, such as offshore wind energy projects.

Challenges in the Carbon Offset Market and SHEL’s Decision

SHEL launched its portfolio of carbon offsets in 2018 with the target of achieving 120 million carbon credits annually. Within three to four years, SHEL became the world’s largest buyer of carbon credits.

Once an attractive avenue for climate change, the carbon offset market started facing challenges recently.The spot prices for REDD+ credits dropped from $12.50 per credit in 2022 to $3.60 in 2023. The reasons for the decline are reduced demand and uncertainty about the environmental impact of some projects. Despite the hurdles, the voluntary carbon market is projected to rise to $950 billion by 2037 from its current $2 billion value. However, SHEL, under its new leadership, has planned to change its focus.

SHEL’s Transition From Carbon Projects

SHEL started changing its strategy after Wael Sawan took over as the new CEO in 2023. Under his management, the company announced to cut in its plan to spend $100 million a year on new carbon credits. The company had shifted its focus to more profitable fossil fuel ventures. The strategy shift is also evident in its recent carbon offset exit where the company plans to sell its nature-based carbon projects.

The company is now considering different approaches to close the deal. One of the options is to become a minority holder by selling some of its holdings but agreeing to keep buying the credits and the other is to sell the projects completely without any commitment to buy the credits.

What Lies Ahead for SHEL and the Carbon Market?

As SHEL reduces its reliance on nature-based solutions, it is exploring different engineered carbon removal technologies like Direct Air Capture. This technology removes carbon dioxide directly from the air and offers a more permanent solution but is constrained by high costs and scalability challenges.

SHEL’s Zacks Rank and Key Picks

London-based Shell plc is one of the primary oil supermajors — a group of the U.S. and Europe-based big energy multinationals with operations that span almost every corner of the globe. Currently, SHEL has a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at some better-ranked stocks like Mach Natural Resources LP MNR, Enerflex Ltd. EFXT and Targa Resources Corp. TRGP. While Mach currently sports a Zacks Rank #1 (Strong Buy), Enerflex and Targa Resources each carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mach Natural Resources LP is an independent upstream oil and gas company that focuses on the acquisition, development and production of oil, natural gas and natural gas liquids reserves. The Zacks Consensus Estimate for MNR’s 2024 earnings indicates 200% year-over-year growth.

Canada-based Enerflex Ltd. provides oilfield services for natural gas and petroleum producers. EFXT’s expected EPS (earnings per share) growth rate for the next quarter is 188.89%, which compares favorably with the industry loss of 22.45%.

Houston, TX-based Targa Resources Corp. is a premier energy infrastructure company and a leading provider of integrated midstream services in North America. The Zacks Consensus Estimate for TRGP’s 2024 earnings indicates 70.22% year-over-year growth.

Zacks Investment Research

Momentum investors typically don't time the market or "buy low and sell high." In other words, they avoid betting on cheap stocks and waiting long for them to recover. Instead, they believe that "buying high and selling higher" is the way to make far more money in lesser time.

Who doesn't like betting on fast-moving trending stocks? But determining the right entry point isn't easy. Often, these stocks lose momentum once their valuation moves ahead of their future growth potential. In such a situation, investors find themselves loaded up on expensive shares with limited to no upside or even a downside. So, going all-in on momentum could be risky at times.

A safer approach could be investing in bargain stocks with recent price momentum. While the Zacks Momentum Style Score (part of the Zacks Style Scores system) helps identify great momentum stocks by paying close attention to trends in a stock's price or earnings, our 'Fast-Paced Momentum at a Bargain' screen comes handy in spotting fast-moving stocks that are still attractively priced.

There are several stocks that currently pass through the screen and Enerflex (EFXT) is one of them. Here are the key reasons why this stock is a great candidate.

A dash of recent price momentum reflects growing interest of investors in a stock. With a four-week price change of 33.9%, the stock of this energy infrastructure provider is certainly well-positioned in this regard.

While any stock can see a spike in price for a short period, it takes a real momentum player to deliver positive returns for a longer time frame. EFXT meets this criterion too, as the stock gained 55.9% over the past 12 weeks.

Moreover, the momentum for EFXT is fast paced, as the stock currently has a beta of 1.89. This indicates that the stock moves 89% higher than the market in either direction.

Given this price performance, it is no surprise that EFXT has a Momentum Score of B, which indicates that this is the right time to enter the stock to take advantage of the momentum with the highest probability of success.

In addition to a favorable Momentum Score, an upward trend in earnings estimate revisions has helped EFXT earn a Zacks Rank #2 (Buy). Our research shows that the momentum-effect is quite strong among Zacks Rank #1 and #2 stocks. That's because as covering analysts raise their earnings estimates for a stock, more and more investors take an interest in it, helping its price race to keep up. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here

Most importantly, despite possessing fast-paced momentum features, EFXT is trading at a reasonable valuation. In terms of Price-to-Sales ratio, which is considered as one of the best valuation metrics, the stock looks quite cheap now. EFXT is currently trading at 0.45 times its sales. In other words, investors need to pay only 45 cents for each dollar of sales.

So, EFXT appears to have plenty of room to run, and that too at a fast pace.

In addition to EFXT, there are several other stocks that currently pass through our 'Fast-Paced Momentum at a Bargain' screen. You may consider investing in them and start looking for the newest stocks that fit these criteria.

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Ovintiv Inc. OVV has announced two major deals on Nov. 14, 2024 — one for the acquisition of premium Montney assets from Paramount Resources Ltd. for about $2.4 billion and the other for the sale of almost all its Uinta Basin assets to FourPoint Resources, LLC, for about $2.0 billion.

An Insight Into OVV’s Purchase Agreement

OVV, per the terms of the purchase agreement, will acquire 109,000 net acres, 70,000 barrels of oil equivalent per day and 900 total net well locations in the oil-rich Alberta Montney.

The $2.4-billion deal, which is expected to be closed by the first quarter of 2025, will be funded through cash and the ownership transfer of certain properties in the Horn River Basin, British Columbia, to Paramount Resources.

The acquired assets have been identified as the undeveloped oil resource that can deliver the highest value and returns. The acquired assets also display leading well performance, which can lead to high volume growth and solidify the company’s position as the premier operator in the oil and gas sector.

OVV’s Sale Agreement for Uinta Basin Assets

As part of its strategic move, OVV has also decided to sell 126,000 net acres of the Uinta Basin in Utah to FourPoint Resources for a consideration of about $2.0 billion in cash. The said divestiture supports Ovintiv’s strategy to streamline its portfolio, wherein the company can focus on its core operations in the high-valued Montney and Permian basins.

Impact of Combined Transaction on OVV

The combined buy and sell transactions are expected to be accretive across all key financial metrics and expand the company’s premium oil inventory to around 15 years. The combined transactions are also likely to generate cost synergies of around $125 million per year. The transactions should enable OVV to maintain a strong investment-grade balance sheet by decreasing its debt. Therefore, the company can expect a high rating from the investment firms.

Financial Gains and Outlook

The transactions should boost OVV’s cash flow by approximately $300 million in 2025. After the transactions, the company will allocate around 85-90% of its 2025 capital to its core Permian and Montney basins. OVV's average oil production is expected to reach 205,000 barrels per day. The deal is also expected to provide strong financial returns, growth in production volumes and long-term shareholder value.

OVV’s Zacks Rank and Key Picks

Ovintiv is an independent energy producer that explores and churns out oil and natural gas from diverse assets located in the United States and Canada. Currently, OVV has a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at some better-ranked stocks like Mach Natural Resources LP MNR, Enerflex Ltd. EFXT and Flotek Industries, Inc. FTK. While Mach currently sports a Zacks Rank #1 (Strong Buy), Enerflex and Flotek Industries carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mach Natural Resources LP is an independent upstream oil and gas company that focuses on the acquisition, development and production of oil, natural gas and natural gas liquids reserves. The Zacks Consensus Estimate for MNR’s 2024 earnings indicates 200% year-over-year growth.

Canada-based Enerflex Ltd. provides oilfield services for natural gas and petroleum producers. EFXT’s expected EPS (earnings per share) growth rate for the next quarter is 188.89%, which compares favorably with the industry loss of 22.45%.

Flotek Industries develops and delivers prescriptive chemistry-based technology, including specialty chemicals, to clients in the energy, consumer industrials and food & beverage industries. The Zacks Consensus Estimate for FTK’s 2024 earnings indicates 125% year-over-year growth.

Zacks Investment Research