OPINION: Countries are finding out that energy independence is necessary from a national security perspective. That will result in significant upside especially for small- and mid-cap U.S. energy companies and their shares.
Russia’s war campaign has jarred the Western world into the realization that energy independence is necessary.
Countries are finding out that energy independence is necessary from a national security perspective, and this new paradigm will take years to implement. That will result in significant upside especially for small- and mid-cap U.S. energy companies and their shares. Now DNOW, +1.33%, Civeo CVEO, -1.08%, Dril-Quip DRQ, -0.64% and CVR Energy CVI, +3.76% boast more attractive valuations than their large-cap energy peers and could easily be acquisition targets.
Though today’s rigs are more efficient, the market must contend with the two-headed dragon of demand from a post-Covid travel recovery while supply decreases from rogue nations including Russian, Venezuela and Iran. Removing supply from an undersupplied market means there is room for energy company stocks to run higher.
None of these are quick fixes, which could cause energy prices to remain elevated for an uncomfortable amount of time. In fact, U.S. production peaked at 12.3 million barrels per day in 2019, and sank 10%, or to 11.1 million, in 2021. With Russia producing around 10 million barrels per day, it is clear countries like Canada and the U.K. will also need to significantly increase production.
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