3 High-Growth Energy Stocks to Buy Now

Kelt Exploration Ltd. (TSX:KEL) and these other producers are growing production by more than 30% and seeing massive increases in cash flows, too.

| More on:

As oil rallies again, energy shares are soaring.

It seems that a renewed optimism is taking hold, as global demand continues to exceed expectations and OPEC announces that they will be extending the production cut agreement to the end of 2018.

From Baytex Energy Corp. (TSX:BTE)(NYSE:BTE) to Canadian Natural Resources Limited to Precision Drilling Corp., energy shares are surging. These companies will see a very strong fourth quarter and year-end 2017.

This reversal of fortunes will drive shares up even further as we head into 2018 and beyond.

In previous articles, I have written a lot about some of the larger energy names that I believe will outperform this year and next. But what about the smaller, higher-growth producers, who, by their very nature are less diversified, and with less financial flexibility, are riskier?

Well, this is the time to bulk up on these stocks, because as oil rises, these stocks will have more upside potential on average than the bigger names.

Here are three high-quality, small energy producers to consider:

With 50% production growth expected in 2017, Seven Generations Energy Ltd. (TSX:VII) has benefitted from its success in bringing down costs and its strong balance sheet. With net debt of $1.8 billion and a debt-to-cash flow ratio of 1.6 times, the company is in great financial shape.

With production in the liquids-rich Kawkwa area of the Montney region, the company’s production is almost 60% weighted to oil and liquids.

In the third quarter, funds from operations per share increased 22% off the strength in commodity prices, production increases, and lower costs.

With more than 90% of its production weighted towards oil, Raging River Exploration Inc. (TSX:RRX) is another such company. The company’s management team is experienced with a good track record and owns roughly 10% of shares outstanding. So, management is aligned with the results of the firm, which is a definite plus.

Production increased 38% in the second quarter of 2017 and the first six months of the year, and funds from operations increased 47% and 82% in the same periods, respectively.

Lastly, Kelt Exploration Ltd. (TSX:KEL), whose management owns 20% of shares outstanding, is also poised for good times ahead.

With 30% production growth expected in 2018 and a strong balance sheet, with a debt-to-cash flow ratio of 2.1 times, the company is in a good position to benefit from this bullish environment.

In fact, the company recently increased its capital-spending plans for 2017 to $226 million, and it has a good inventory of low-risk drilling assets in the prolific Montney area.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Karen Thomas owns shares on Canadian Natural Resources and Precision Drilling.

More on Energy Stocks

A worker overlooks an oil refinery plant.
Energy Stocks

Is Imperial Oil Stock a Buy, Sell, or Hold for 2025?

Valued at a market cap of $55 billion, Imperial Oil pays shareholders a growing dividend yield of 2.4%. Is the…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Where Will Imperial Oil Stock Be in 1 Year?

Imperial Oil is a TSX energy stock that has delivered market-thumping returns to shareholders over the last two decades.

Read more »

Pumpjack in Alberta Canada
Energy Stocks

1 Magnificent Energy Stock Down 17% to Buy and Hold Forever

Down over 17% from all-time highs, Headwater Exploration is a TSX energy stock that offers you a tasty dividend yield…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Is Cenovus Energy Stock a Good Buy?

Cenovus Energy (TSX:CVE) stock is primed for capital gains and strong total returns in 2025, driven by strategic buybacks and…

Read more »

Trans Alaska Pipeline with Autumn Colors
Energy Stocks

2 High-Yield Dividend Stocks That are Screaming Buys Right Now

Natural gas stocks like Peyto Exploration and Development are yielding above 7% today and look undervalued as natural gas strengthens.

Read more »

chart reflected in eyeglass lenses
Energy Stocks

Best Stock to Buy Right Now: Canadian Natural Resources vs Cenovus?

Want to invest in Canadian energy? Canadian Natural Resources and Cenovus Energy are two of the largest, but which one…

Read more »

oil pump jack under night sky
Energy Stocks

Where Will Cenovus Stock Be in 1/3/5 Years? 

Let's dive into whether Cenovus (TSX:CVE) stock is worth buying right now and where this stock could be headed over…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Best Stock to Buy Right Now: Canadian Natural Resources vs Suncor?

These energy giants are returning significant cash to shareholders.

Read more »