Since the end of 2022, energy prices, especially natural gas futures, have significantly declined. Natural Gas (Dec’ 23) has fallen by 43%, and WTI Crude (Jan’ 24) has seen a drop of 1% within the same period. With the energy market not very profitable in 2023. Investors are hesitant to invest in these companies and are beginning to look elsewhere.
These are a few energy stocks that investors should stay away from now. Two companies, Gevo (NASDAQ:GEVO) and Devon Energy (NYSE:DVN), maybe ones investors should look into once the energy market recovers. But Tellurian(NYSE:TELL) is beyond repair.
Gevo (GEVO)
Gevo primarily produces gasoline, diesel, jet fuel, natural gas, and animal protein products.
Over this past year, Gevo has seen a significant decline in its share price, which has fallen by 46%. Even their most recent earnings report, which was for the third quarter of 2023, stated some positive results, including total revenue growing from $309,000 in Q3 2022 to $4.5 million this quarter. And their net loss shrank by 64%.
Even with the somewhat reassuring news for their financial situation, the stock just continues to drop, most likely due to the overall renewable energy market’s significant downturn over the previous year. Investors are hesitant to put money into renewable energy companies at this time because they typically require a substantial amount of capital for energy projects, which in this environment of high interest rates leave investors looking elsewhere.
Gevo has seen positive results lately and offers an in-demand product, but with the renewable resource market plummeting as of late, this is a stock to steer clear of for now.
Tellurian (TELL)
Tellurian (NYSE:TELL) is based in Houston, Texas, and is a natural gas producer with over 100 natural gas wells in and around Louisiana. The company has been struggling financially as of late. Its new Driftwood LNG Project is unlikely to produce natural gas resources until late 2026. It is expected to be a large facility with five plants.
Over this past year, Tellurian has seen its share price drop by 80%. Their third-quarter earnings release, published on November 2, stated their total revenue fell by nearly 50%, and their net loss expanded by more than four-fold.
Tellurian is a company that may be nearing bankruptcy, and with its large amount, its new LNG project is required. And also compounding on top of that is the fact that the energy market has dropped this year compared to 2022. It looks like Tellurian may only be profitable once.
Devon Energy (DVN)
Devon Energy operates as an independent energy company that explores and acquires crude oil and natural gas properties. They operate in the Delaware, Anadarko, Eagle Ford, Williston, and Powder River Basin, located in North Dakota, Wyoming, New Mexico, Texas, and Oklahoma.
Since late November 2022, they have seen a decline in their share price of approximately 30%. Devon Energy recently reported earnings for the third quarter, which stated that their total revenue dropped by 29% and their net income was cut in half. This is primarily due to the overall reduction in energy prices. They also reported a 20% increase in production for their property in the Delaware Basin. And their free cash flow has doubled quarter-over-quarter. Going into 2024, the CEO announced the plan to concentrate on the Delaware Basin to help reduce expenditures elsewhere.
Devon Energy may be a company to keep an eye on. At this moment, I wouldn’t recommend buying in, but when energy stocks start to see a rebound, this one could be a decent buy down the road.
As of this writing, Noah Bolton did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
