Excellent right Industry at right time $10 run in the works.
Cheap Oil Stocks Under $5: Is USWS The Next Big Name
With oil prices soaring, investors are looking for the best oil stocks to invest in. With many names being thrown around among the investor community online, US Well Services (NASDAQ: USWS) seems to stand out for a number of reasons. The company specializes in hydraulic fracturing services in unconventional oil and natural gas basins. Both its conventional diesel and electric Clean Fleet® hydraulic fracturing fleets are among the most reliable and highest performing in the industry. For this reason the stock has seen an uptick in interest among cheap oil stocks under $5, with stock price anticipated to rise in the future.
Catalysts
USWS has been pursuing collaborations in line with its mission to help oil producers reduce their carbon footprint which has become a growing trend among other companies in the industry. This means that the market for USWS’s products is growing as shown by the company’s recent partnerships. This innovation in a new market is what is catching investors’ attention looking to invest in cheap oil stocks under $5.
Back in July USWS announced the deployment of an all-electric Clean Fleet® to work for Pioneer Natural Resources Company (NYSE: PXD). USWS also highlighted a collaboration with Seneca Resources Company, LLC and the production segment of National Fuel Gas Company (NYSE: NFG) on an upcoming field trial using USWS’ Clean Fleet®. This will be the first well fully using all-electric fracturing technology.
More collaborations are likely on their way as USWS is recognized as the market leader for low-cost, low-emission, completion services. The company’s attention to environmental, social and governance best practices has resulted in increased demand for its electric fleets. Now USWS is working to meet this demand with the next-generation of fracturing solutions.
The first 60,000 newbuild hydraulic horsepower Nyx Clean Fleet® are expected to be delivered Q1 of 2022. USWS is already in negotiations with multiple customers and expects to secure contracts for each new fleet prior to delivery.
With business booming, it’s no surprise that USWS’ financials reflect its growth. Bringing in $78.8 million in revenue in Q2 of 2021, the company has managed to increase its revenue by $2.2 million from the previous quarter. However, USWS issued $125.5 million in convertible senior notes to raise $86.5 million in gross cash proceeds to sustain its growth.
USWS has also reduced its senior secured term loan to only $201.4 million after paying off $44.9 million of the loan after the sale of 30% of its diesel pressure pumping assets. This was the result of USWS’s decision to cease all operations with its conventional diesel fleet, leaving the company with five all-electric fleets. After this fleet reduction, USWS expects to grow its operations to 9 electric fleets by the end of 2022.
But USWS also has some long-term growth catalysts in store. The company entered into a license agreement with ProFrac Manufacturing, LLC which provides ProFrac with a five-year option to purchase up to 20 licenses from USWS. These licenses would allow ProFac to build electric fleets using Clean Fleet® technology worth up to $165 million. USWS has already sold 3 licenses which generated $22.5 million in income and will continue to benefit from the agreement as more licenses are redeemed.
However, investors are most interested in USWS’ reverse share split – effective October 1st. The split allocates 1 post-split share for every 3.5 pre-split shares which has led to speculation that there could be a short squeeze in store. With many FinTwit influencers showcasing their support for USWS now by buying below the $3 mark, some investors are anticipating it will reach double-digits in a runup like CEI’s, making USWS one of the biggest contenders for cheap oil stocks under $5.
Media Sentiment
We’ll see if @Alex_trades gut feeling is right about today…
Technical Analysis
Currently trading at $2.88, USWS shows a resistance point at 3.36 and a closer resistance at 3.07. USWS shows a weak support at 2.83 and a secondary support at 2.43. Accumulation has been fairly volatile with a bearish crossover on the MACD appearing on October 12th. Now the RSI is holding at 50.84.
Should You Buy?
With oil prices soaring, investing in companies in the industry seems straightforward, as USWS presents one of the best opportunities for cheap oil stocks under $5. What makes USWS stand out is its status as a market leader for low-cost, low-emission, completion services. Companies with USWS’ environmental perspective are very popular at the moment and its strong fundamentals are a good long-term sign for the company. In the short-term USWS could present a good opportunity to join the momentum fueled runup, especially as investors experiencing FOMO after CEI join the rush. If the momentum keeps up, USWS could surpass $3 very soon.
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Eric Daalman
Member since August 13, 2021
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