WTI Crude Oil has continued its rise as tensions escalate in the Middle East due to ongoing developments and significant uncertainties. Year-to-date, Crude Oil futures have risen over 20%, climbing from almost $70 to just over $85 at Friday's close.
While the overall market, namely the SPDR S&P 500 ETF Trust (NYSEARCA: SPY), has pulled back almost 3% from its record high and 52-week high near $524, commodities have surged higher amidst economic and geopolitical concerns. Gold and silver have surged, with the price of gold reaching new all-time highs.
As oil prices continue to rise and consolidate near recent highs, and the situation continues to develop in the Middle East, several small-cap energy sector stocks experienced significant price and volume surges on Friday. Could these stocks be under-the-radar gems set to benefit from higher oil prices, or are they merely benefitting from hype and be avoided as investment altogether? Let's take a closer look.
5 Small Cap Energy Stocks Catching a Bid
1. Indonesia Energy Corp.
Indonesia Energy (NYSE: INDO) is a micro-cap oil and gas exploration and production company. The stock has a $50 million market capitalization and an average volume of 140,393 shares. That light volume and small float make the stock extremely susceptible to heightened volatility. The stock experienced a notable surge in volume and price on Friday, with almost 60 million shares trading and surging just over 80%. Despite the recent surge, its relative strength index (RSI) is already in overbought territory at 80.38, suggesting the stock is overvalued. The stock also has limited institutional ownership, just 0.51%, and a history of extreme declines following rapid price surges.
2. Houston American Energy Corp.
Houston American Energy (NYSE: HUSA) is an independent oil and gas company that explores, develops, and produces natural gas, crude oil, and condensate. HUAS has a $23 million market capitalization and an average volume of only 338,429 shares. Along with INDO, HUSA surged 35% on Friday on elevated volume. However, over a longer timeframe, the stock has a history of trending lower and failing to maintain a base higher. HUSA has a 12.18% institutional ownership and limited free float of just 9.2 million shares, making the stock an extremely speculative and heightened risk option.
3. Trio Petroleum Corp.
Trio Petroleum (NYSE: TPET) has experienced a remarkable surge in both volume and price lately, with the stock soaring over 300% on the month. Based in the United States, TPET operates as an oil and gas exploration and development company. The company has a micro-cap of $19 million and just 36 million shares outstanding, making the small-cap energy name largely speculative. Despite the recent surge, the stock remains in a higher timeframe downtrend, down significantly from its 52-week high.
4. Imperial Petroleum Inc.
Imperial Petroleum (NASDAQ: IMPP) has a market capitalization of $61 million and operates as an international seaborne transportation service to oil producers, refineries and commodities traders. The stock has a history of surging higher with other small-cap energy stocks when a broader theme has been present. Despite experiencing an uptick in volume on Friday, IMPP failed to match the performance of the names mentioned above and closed the day down 4%. However, unlike the above stocks, IMPP holds significant institutional ownership, with a 94.44% ownership percentage.
5. CN Energy Group Inc.
CN Energy Group (NASDAQ: CNEY) also experienced an uptick in volume on Friday, with the stock trading over 3 million shares compared to its average volume of just 67,751. However, the stock closed the day only up around 12%. The company, which primarily manufactures and supplies wood-based activated carbon in China, has only 2.3 million shares outstanding and a market capitalization of only $2.7 million, making it an extremely speculative and risky option.
Should You Invest in Small Cap Energy Stocks?
Although several small-cap energy names have caught a bid in the short term due to rising crude oil prices and the ongoing situation in the Middle East, investors should understand these companies' risky nature and profile, as well as their history of performance and extreme volatility before making any investment decisions.
