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Penny stocks are small companies that tend to have highly speculative and illiquid stocks; they are high risk, but can also offer great returns. The energy sector has been on the rise recently with the gradual increase in natural gas prices, making right now a great time to invest in natural gas penny stocks.
Here are five of the top picks in the sector.
Five Natural Gas Penny Stocks
VAALCO Energy Inc. (NYSE: EGY)
Vaalco Energy is an independent energy company that specialize in the exploration, development, and production of natural gas and crude oil. It owns a variety of production properties and it is currently carrying out exploration in Angola and Gabon. The company is also one of the non-operators exploring in Equatorial Guinea and the British North Sea. It has other resource properties in North Texas, South Dakota, and Montana.
Vaalco intends to increase its exploration activities in Angola and Equatorial Guinea by the close of 2015, which analysts expect will raise the company's revenue even further.
EGY stock recently rose to $7.25 from $5.98. This is a significant move, especially because it is higher than what analysts were expecting. The company notched a net income of $0.74 per share in 2013 from $0.01 in 2012, indicating that Vaalco is growing rapidly. That, plus its vast exploration activities across the globe, makes Vaalco one of the best natural gas penny stocks.
Advantage Oil & Gas Ltd (NYSE: AAV)
Advantage Oil & Gas deals with the acquisition, exploration, development, and production of gas and oil in the Saskatchewan and Alberta provinces in Canada. The company also deals with the production and sale of natural gas liquids, natural gas, crude oil, and sulfur through its various subsidiaries.
This penny stock is currently trading at $4.41, which is a 0.23% increase from the previous price. It trades hundreds of thousands of shares in a day, indicating the high level of interest in this particular penny stock.
AAV's vast assets in the energy sector make it one of the most lucrative companies. Its large production capacities, coupled with the current increase in natural gas prices, could translate into significant returns for investors.
Constellation Energy Partners LLC (CEP)
Constellation is an LLC that focuses on acquiring, developing and producing natural gas and oil properties. The company has other related assets, but natural gas production is its main focus. Its natural gas production is based in Kansas, Oklahoma, and Alabama.
CEP shares have risen by 32% since the company sold off some of its operations and assets in 2012. The sale involved more than 500 operational natural gas wells – a number which belies the vast assets owned by CEP. Proceeds from the sale are intended to help company to offset its debt, which will be a significant advantage for investors moving forward.
Blue Dolphin Energy Co. (BDCO)
One of the most promising natural gas penny stocks, Blue Dolphin Energy, is an independent gas and oil firm. Its shares rose by 55% in the initial quarter of 2013, which is attributed to the company's decision to optimize stockholder valued by making it a publicly traded master limited partnership. Investors have shown heightened interest in the company since this move.
BPZ Resources Inc (NYSE: BPZ)
BPZ is one of the best natural gas penny stocks for investors who want significant returns on their investment. This is an independent gas and oil company that specializes in exploration and production.
The company paid off an $82.2 million bank debt and had a cash balance of $57.4 million by the close of 2013. Its administrative expenses were down by 16% compared to 2012, and it's been recognized as a "socially responsible company." All these aspects indicate that BPZ has a bright future.