3 Small-Cap Stocks To Play The Oil Recovery

3 Small-Cap Stocks To Play The Oil Recovery

The oil markets have been held hostage since entering into its latest bear market, which began in July 2014 when the price of oil was still around $100 per barrel. The subsequent bearish fundamentals pushed oil prices all the way to the low $20s by early 2016.

However, oil prices are making a major comeback in 2017. Over the past six months, WTI crude oil has jumped 24.43% and Brent crude oil has surged 31.01%, as rising geopolitical concerns around the world give oil producers a chance to benefit from higher prices.

Saudi Arabian Crackdown Leads To Rallying Oil Prices

Middle Eastern oil powerhouse, Saudi Arabia, is the latest source of oil price appreciation. On Saturday, November 4, 2017, Saudi Arabia began to crackdown on high-level officials in an effort to curb corruption. Among the prominent leaders arrested was the billionaire investor, Prince Alwaleed bin Talal, which would be the equivalent of the U.S. government arresting Bill Gates or Warren Buffet.

The major crackdown and potential political destabilization of Saudi Arabia is one of the most bullish factors for underlying oil prices right now. As commodity markets opened on the Monday following the crackdown, oil prices surged over 2% in early trading. Other major geopolitical issues, such as the escalating Kurdish-Iraqi violence, could easily help provide further gains for oil prices.

Bullish Analyst Projections

The latest developments have prompted many analysts to revise their oil outlooks upward. Phil Streible, a senior market strategist at RJO Futures, told clients that the oil outlook remains bullish.

"A combination of internal political trouble in Saudi Arabia combined with another decline in U.S. rig operating counts and a definitive extension in 'risk on' psychology leaves the path of least resistance pointing upward," added Streible.

Furthermore, analysts at several major brokerages collectively raised their oil price targets. Jefferies analysts are now estimating WTI prices of $55 per barrel by the end of 2018. Bank of America (NYSE: BAC) chose to raise its fourth quarter 2017 oil price target to $49 from $47.

As oil prices rebound and look to be coming out of their bearish trend, here are three small-cap oil stocks to keep on your radar:

American Patriot Oil & Gas, Ltd. (OTCQB: ANPOF) (ASX: AOW): American Patriot Oil & Gas, Ltd. operates as an oil & gas production company. The company has been making major acquisitions over the past several months that have bolstered the company’s U.S. oil & gas production assets. After its latest oil acquisition in East Texas, American Patriot Oil & Gas, Ltd. now has independent proven oil reserves of around 2.1 million barrels of oil equivalent.

The company’s acquisition spree has led to seven active oil and gas assets with the focus on the Texas and Gulf Coast Regions. Furthermore, American Patriot Oil & Gas, Ltd. is now on track to produce 500 barrels of oil per day by the end of the year. Under production estimates ran by management, reports indicate they could earn $50 million in revenue at $50 oil. If oil can continue to rise and even break $60 per barrel, the company could be on track to generate tens of millions more in revenue.

American Patriot Oil & Gas, Ltd. recently provided an update on its $40 million financing facility. The facility is nearly finalized and should be closed within the next 40 days, subject to further due diligence. However, the company has already been able to utilize the financing facility for its recent major Texas acquisitions.

American Patriot Oil & Gas, Ltd. may be an under-the-radar stock right now, but the company’s well-executed growth plan will likely help make 2018 a very profitable year with an aggressive oil and gas production acquisition plan underway.

Petro River Oil Corp. (OTC Pink: PTRC): Petro River Oil operates as an independent energy company, which maintains the majority of its assets in Osage County, Oklahoma and Kern County, California. The company made headlines in first half of 2017, after making several sizable oil field discoveries while utilizing its 3D seismic imaging technology.

The company recently announced that it has acquired an additional 46.81% stake in its Osage Project. Management plans on drilling nine new development wells and three exploration wells at the Osage Project. In order to fund the drilling program, the company closed a $2.5 million secured debt financing agreement with Petro Exploration Funding II, LLC. Under the terms of the deal, there will be a three-year note holding a 10% annual interest rate and 2% in overriding royalty interest. Furthermore, the financing company received warrants to purchase $1.25 million shares of the common stock at a price of $2.00 per share.

Petro River Oil Corp. is moving from the exploration phase to the development phase, after making several discoveries earlier this year. Overall, the company appears to have a solid strategy in finding “untouched” oil reserves.

MMEX Resources Corporation (OTCQB: MMEX): MMEX Resources Corporation is engaged within the acquisition, exploration and development of oil and gas properties across Texas, Peru, and other Latin American countries.

The company is set to begin building its 10,000 barrel-per-day oil refinery located near Fort Stockton, Texas. It will take about 15 months to complete, but it will serve as a major revenue generator once it is operational. In addition, the company recently completed a successful uplisting to the OTCQB Venture Market, which will help increase investors’ trust in the company. Overall, MMEX Resources Corporation is well positioned to generate sizable revenues from its oil refinery located near the highly prized Permian Basin formation.

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