10 Best Oil Penny Stocks Under $5 to Buy Now

Penny stocks allow you to purchase inexpensive shares for $5 or less. While riskier than standard stocks, Penny stocks will enable you to target a more considerable growth potential. We look at ten of the greatest penny stocks to add to your portfolio right now in this market insight.

Intro

Outside of the major stock exchanges, penny stocks are traded. Small-cap stocks are connected with a lot of speculation and significant risk. Varying countries have different definitions of penny stocks. Penny stocks are equities that trade for less than $5 on the Western market. Because their market capitalization is less than $300 million, they are classed as micro-cap stocks. Penny stocks, like other securities, provide a chance for future investment.

The following are characteristics of penny stocks:

• They are cash-strapped.

•  Information about penny stocks is never easily accessible to the general public.

• The majority of penny stocks have no history in terms of assets, revenues, operations, or goods, and they have no minimum standards.

The COVID-19 epidemic and the oil price wars are both global calamities for the oil and gas industry. Oil and gas stock prices fell as a result of this. Motor vehicles were not in use because many people were practicing social separation. Despite the oil industry's hysteria, it's clear that oil stocks are recovering.

With oil stocks on the rise, the stock market offers a plethora of investment prospects. Due to low oil consumption in many nations, crude oil output has been reduced worldwide. Investors are also watching the US-China trade spat closely. If the friction leads to a deterioration of the Phase 1 trade agreement, oil prices will suffer.

Despite their considerable dangers, oil penny stocks have the potential to generate huge returns for a small investment. A stock exchange regulates oil penny stocks on a nationwide basis. Penny stocks are defined by the Securities and Exchange Commission (SEC) in the United States. The following characteristics are found in these stocks:

• Small company shares trade for less than $5, and private company shares have no active trading market. Shares are traded over the counter, but they can also be listed on local and international stock exchanges.

• Shares are extremely illiquid, making it difficult to price them due to a lack of price quotations.

Penny stocks are classified as a separate category called a trade-to-trade basket. It is due to the high level of danger involved. Penny stocks are available for purchase both on and off the stock exchange. Gross transactions are carried out.

It's critical to comprehend all of the risks involved with oil penny stocks. Although there are many tiny caps to choose from, you must know which ones to avoid and which ones to trade. A stock screener, which is an innovative trading program, can be used. A stock screener can assist you in finding interesting oil penny stocks. To become an expert at trading penny stocks, you must develop trading methods. These trading methods may assist you in making money in the short, medium, and long term.

What Are Oil Stocks?

Do you know that the United States' oil and natural gas business accounts for 8% of the country's GDP? The top five oil-producing states in the United States are Texas, New Mexico, North Dakota, Oklahoma, and Colorado.

Companies involved in oil and gas exploration, acquisition, development, refining, and distribution make up the oil and gas sector. On the market, there are two types of oil and gas companies:

1. Integrated Oil and Gas Companies

2. Independent Oil and Gas Companies

Most major oil and gas firms, such as ExxonMobil (NYSE: XOM) and Chevron Corporation (NYSE: CVX), are integrated businesses that split their operations into upstream, midstream, and downstream segments. These integrated businesses can protect their earnings from financial downturns and oil price volatility.

Independent oil and gas companies are businesses that specialize in only one aspect of the industry. Most small to medium-sized oil and gas enterprises continue to operate as independent companies to benefit from the laser-sharp focus. However, these small businesses are subject to fluctuating oil prices and bad market conditions.

Several oil and gas businesses are trading on stock exchanges, with the potential to earn large profits for shareholders. Investors may need to keep a close eye on these companies and buy their shares at the right time. We'll look at the top five inexpensive oil stocks under $5 to keep an eye on in this post.

10 Best Oil Penny Stocks Under $5

1. Ardmore Shipping Corp (NYSE: ASC)

If you are looking for oil penny stocks on the New York Stock Exchange, we recommend starting with Ardmore Shipping Corp.

• This world-class company all over the world provides chemical tanker services.

• Ardmore Shipping Corp, founded in 2010, provides maritime shipping services for petroleum and chemical products to a variety of enterprises.

• It prides itself on having one of the most modern tanker fleets in the industry, with a fleet of 27 shipping vessels.

Ardmore Shipping Corp. is concentrating its efforts on being more ecologically friendly while preserving its zero-spill record.

We may see strong results for Ardmore when international economic activity picks up, thanks to its energy transition plan, demonstrating its dedication to future growth.

2. NexTier Oilfield Solutions Inc. (NYSE: NEX)

NexTier Oilfield Solutions Inc. provides integrated completions and production services to help oil basins increase production rates.

The company operates in the oil and gas industry in the United States and is unique in that all of its integrated services are aimed toward sustainable practices.

When compared to last year's pricing, this stock has grown by more than 170 percent.

NexTier is currently one of the most prominent land finishing suppliers in the United States. Its proven performance as a value-adding service provider demonstrates its ability to develop in the sector.

3. Kosmos Energy Ltd. (NYSE: KOS)

Kosmos Energy Ltd. is a deepwater oil and gas exploration and development business based in Dallas.

Its current energy efforts are concentrated in the Atlantic Margins region, but it also has project assets in Ghana, Equatorial Guinea, Mauritania, and Senegal.

Kosmos Energy's projects are all historically abundant sources of petroleum reserves that give superior production returns while reducing the company's carbon footprint.

Kosmos Energy Ltd. has a market worth of $1.6 billion, thanks to a 233.96 percent increase in the previous year and sustained growth-related investments, putting the company in a strong position to develop as energy prices rise. 

4. Ultrapar Participacoes SA (NYSE: UGP)

If you want to trade crude oil and gas penny stocks, keep a close watch on Ultrapar Participacoes SA.

Ultrapar Participacoes SA is a Brazilian oil and gas corporation specializing in fuel distribution in Brazil, Mexico, Uruguay, Venezuela, and Latin America.

• The corporation has different segments that handle crude oil procurement, processing, distribution, and logistics throughout its subsidiaries for its many products and services.

• Ultrapar has purchased various beneficial organizations over the last decade, allowing it to control 30% of the liquid bulk storage industry and 15% of the fuel sector in Brazil.

• It is also Brazil's fourth-largest corporation and one of the world's top 500 corporations.

• Ultrapar Participacoes SA's earnings have increased by over 230 percent in the last year, making it an oil company to keep an eye on.

5. NGL Energy Partners LP (NYSE: NGL)

NGL Energy Partners LP is a midstream corporation that provides production, storage, processing, marketing, and transportation services.

• The company provides these services to companies in the natural gas liquids, renewable energy, water solutions industries, and the crude oil industry.

• It is currently investing its resources in assets that allow growth potential, increased volume, and enhanced operational return rates.

NGL Energy Partners LP is in a strong position to benefit from growth opportunities as it expands its operations, increasing revenue by 76% year over year.

6. Nordic American Tankers Ltd (NASDAQ: NAT)

Nordic American Tankers Ltd is a crude oil shipping firm based in Bermuda that acquires and charters various tankers on the worldwide oil market.

To retain close customer ties and influential contracts, the company is deliberately expanding its fleet of shipping vessels.

Nordic American currently operates a fleet of 23 shipping vessels.

• It's also one of the few organizations specializing in operating the world's largest Suezmax fleets, allowing its ships to maximize cargo space while transiting the Suez Canal.

• It increases the efficiency of trips while lowering expenditures.

In October, the business announced that its fleet expansion initiative had begun with the purchase of two vessels from South Korea, which will deliver in the year 2023.

Nordic American Tankers will be able to potentially boost future earnings and give higher value to shareholders as a result of this.

7. Helix Energy Solutions Group, Inc. (NASDAQ: HLX)

Helix Energy Solutions Group, Inc. assists firms in the subsea or gas field industries with production maximization.

Well, intervention services, robotics applications, and production facilities are used to do this.

Helix Energy offers a fleet of healthy intervention vessels and remotely operated vehicles that work together to boost oil resource production rates dramatically.

Its clientele is mostly from the Gulf of Mexico in the United States, Brazil, the North Sea, Asia Pacific, and West Africa.

In September, the company stated that it had entered into an asset-based revolving credit facility (the "ABL Facility") with a group of banks.

Helix's prior credit facility and term loan, most of which were paid off in full at the same time, has been replaced by the ABL Facility.

8. PHX Minerals (NYSE: PHX)

PHX Minerals is a natural gas and oil exploration and production firm based in Oklahoma. At the end of September 2020, the organization had proven mineral reserves of 57.7 BCFE (billion cubic feet equivalent). In Oklahoma, Texas, North Dakota, Arkansas, and New Mexico, PHX possesses 252,443 net mineral acres. PHX Minerals' stock was trading at $2.58 at the time of publication.

PHX Minerals generates money from two key sources. They are:

1. Oil and natural gas production and selling.

2. Royalties and lease bonuses received from mineral leasehold acreage. 

Top management is dedicated to strengthening the balance sheet and increasing the organization's financial stability. Over the following three years, the company plans to deleverage its balance sheet by repaying the whole debt using free cash flows.

Before making an investment decision, investors may want to keep an eye on how this growth stock creates and manages free cash flow in the short run.

9. VAALCO Energy Inc. (NYSE: EGY)

VAALCO Energy Inc. is a company that specializes in oil and gas exploration, acquisition, and development. The company's headquarters are in Houston, Texas. As of December 2020, the organization had proven reserves of 3,216 million barrels of oil. At the time of publication, VAALCO Energy was trading at $3.07.

The last few years have been extraordinary for VAALCO, as it has achieved three key milestones:

1. It successfully obtained a license extension for the Gabon Project for up to 20 years.

2. It paid off all of its debt and kept generating free cash flow.

3. It kicked out the 2019-2020 drilling campaign by drilling three development wells and two appraisal well-bores successfully. 

In 2022, VAALCO is expected to begin the next drilling campaign, which will drill up to four bore wells, potentially increasing the company's production capacity by 8,000 barrels of oil per day.

Investors may want to keep this small-cap mining stock on their radar because of its devoted top management, consistently improving production capacities, and ability to create free operating cash flow.

 10. Southwestern Energy Company (NYSE: SWN)

Southwestern Energy Business is a significant natural gas exploration company in the United States, with headquarters in Texas. The company has 938,000 net acres of exploration properties in Ohio, Louisiana, Pennsylvania, and West Virginia. The company's anticipated daily production from these properties is 4 BCFE.

Southwestern Energy Company's stock was trading at $4.98 at the time of writing, with a market capitalization of $5.01 billion.

Inorganic growth is important to Southwestern. Montage Resources was purchased for $194 million in 2020. It also announced the $2.7 billion purchase of Indigo Natural Resources and the $1.8 billion purchase of GEP Haynesville. Southwestern expects to generate over $2.5 billion in free cash flow and lower its debt to $3 billion as a result of these three acquisitions.

Investors may want to keep an eye on this energy company and see how these purchases affect production capacity, debt reduction, and free cash flow generation.

Are Penny Stocks Worth It?

As things stand, the world still needs oil, making it an attractive investment for anyone looking to get into a tried and true business while still producing money.

Even if numerous other energy sources are emerging, the oil sector still benefits from the current energy infrastructure.

Even with the introduction of electric vehicles (EVs), oil has many additional applications, such as plastics.

The oil sector isn't always stable: it's prone to fluctuate market swings, which could have an impact on your investment.

Additional hazards are involved with oil, such as oil spills, which could harm your oil stocks if a firm becomes embroiled in a scandal.

Because penny stocks are already volatile, this increased volatility could mean even more wild stock price movements.

However, if you play your cards right, investing in energy firms during periods of high oil and gas prices can pay you handsomely.

When trading penny stocks — or any stocks for that matter — you'll also want to do your homework.

The Bottom Line

Oil is still strongly dependent on the world, and this is unlikely to alter very soon. In fact, gas demand is increasing as we speak, which is a trend you may profit from by buying cheap oil stocks. So make sensible decisions and remember that perseverance pays off.

It is impossible to deny that equities selling under $5 are incredibly volatile. However, a thorough examination of these companies' operational operations, financial stability, dividend yield, and future growth potential can help us determine whether we can invest in them and make a profit.Many stocks will cost you hundreds of dollars, if not thousands. As a result, if you want to buy pricey stocks on a tight budget, you'll only be able to acquire a fraction of a share.

After you've decided which penny stocks to keep an eye on for your portfolio, you may place an order with your preferred stockbroker. This study's best oil and gas companies are both financially and operationally sound. They are always on the lookout for ways to minimize debt and improve operating free cash flow. Many of the NASDAQ and NYSE-listed mining and biotech companies are included in mutual funds and exchange-traded funds (ETFs). 

Suppose you don't want to take the risk of investing in individual mining businesses. In that case, you can go for well-known mining ETFs like First Trust Natural Gas ETF, InfraCap MLP ETF, and Invesco Dynamic Energy Exploration & Production ETF.