The price of oil has been skyrocketing over the past two weeks, hitting its 13-year high of $130. This is due to fears of a sizable supply crunch from Russia's invasion of Ukraine. In addition, it’s likely the U.S. will ban Russian oil and natural gas imports, which can push global gas and oil prices even higher.
The high demand for energy stocks is evidenced by the Energy Select Sector SPDR ETF (XLE) 42% gains year-to-date (YTD) compared to S&P 500 Trust ETF’s (SPY) 12% loss over the same period.
With this in mind, I will analyze and compare two Oil & Gas stocks, Imperial Petroleum Inc. (IMPP) and Indonesia Energy Corporation Limited (INDO), to determine which one presents a better buying opportunity at current levels.
Based in Athens, Greece, Imperial Petroleum is a ship-owning company that provides petroleum products and crude oil seaborne transportation services with a cargo fleet capacity of 255,804 dwt. Founded in 2018, INDO engages in oil and gas exploration and production in Indonesia. It owns interests in the Kruh Block and Citarum Block.
Year-to-Date (YTD), shares of IMPP have jumped 178%, while INDO stock skyrocketed about 1,633% over the same period.
Recent Developments
On February 3rd, Imperial Petroleum closed its upsized underwritten public offering of 9,600,000 units, consisting of one common share and one Class A warrant to purchase one common share. The price per unit stood at $1.25. Consequently, the gross proceeds of the offering are estimated to be about $12 million. The company plans to use recently raised funds for capital expenditures.
On January 24th, Indonesia Energy announced it had closed the $5.0 million tranches with a single institutional investor. The company placed senior convertible notes with a 6.0% original issue discount, maturing in 18 months with a fixed conversion price of $6.00 per ordinary share. The company will use the net proceeds to fund its previously announced oil well drilling program and general corporate purposes.
Recent Quarterly Performance
On December 21st, Imperial Petroleum issued an earnings report for the third quarter of 2021. In Q3, the company’s net revenues stood about 24% lower year-over-year at $3.4 million, primarily due to the soft spot market and one of its product tankers being idle for about 40 days, thus producing 67% less revenue compared to the year-ago period.
Furthermore, its third-quarter net loss was $0.92 million, compared to a net loss of $0.66 million in the third quarter of 2020. Century Imperial Petroleum's EBITDA for the third quarter came in at $1.24 million, representing a 17% decrease from the year-ago quarter.
Finally, its cash on hand significantly decreased from $6.45 million as of December 31st, 2020, to $1.44 million as of nine months ended 2021. The decrease in cash was due to net cash distributions to StealthGas Inc. to cover financing and other working capital requirements. However, the recent public offering is expected to improve the company's liquidity position.
Indonesia Energy last issued its earnings results on Thursday, September 30th. In the first half of 2021, the company's total revenue has been reported 3% higher year-over-year at $1.06 million, driven by an increase in the Indonesian Crude Price.
On the expenses side, its total operating expenses decreased 18% year-over-year to $3.99 million in 1H2021, primarily due to a 27% decrease in General and Administrative expenses to $2.56 million. Consequently, its net loss decreased by 18% YoY to $2.93 million.
As of August 31, 2021, the company had total cash of $2.77 million on balance. With a cash burn rate of $2.93 million in 1H2021, I think the company has enough liquidity to fund its operations for at least the next 6 months, considering the recently raised $5.0 million.
Analysts covering INDO forecast that its EPS will stand at ($0.17) in the quarter ended March 31st, 2022. Additionally, Wall Street anticipates INDO to report revenue of $0.7 million in FQ1.
Comparing Institutional Ownership
Imperial Petroleum's institutional ownership is approximately 24.14% of its diluted shares, while Indonesia Energy hasn't institutional investors. The major IMPP investor is Heights Capital Management, Inc., which owns around 1.2 million shares or 8.35%. Next are Glendon Capital Management L.P., MSD Partners, L.P., and Russell Investments Trust Company. Their stakes come in at about 5.56%, 3.06%, and 2.42%, respectively.
According to CNN Business, approximately 1.8 million IMPP shares were bought by institutions, and 0.3 million shares were sold during the fourth quarter of fiscal 2022. So, we can see that the buy/sell ratio stood at 6x, which emphasizes a substantial increase in institutional activity.
The Bottom Line
While Imperial Petroleum and Indonesia Energy Corporation should benefit from the higher oil and gas prices, I believe Imperial Petroleum is a better investment at current levels based on its relatively better financials, stronger liquidity position, and favorable institutions' sentiment.
IMPP shares were trading at $6.77 per share on Tuesday morning, down $0.73 (-9.73%). Year-to-date, IMPP has gained 216.36%, versus a -12.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Oleksandr Pylypenko
Oleksandr Pylypenko has more than 5 years of experience as an investment analyst and financial journalist. He has previously been a contributing writer for Seeking Alpha, Talks Market, and Market Realist.
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