3 International E&P Stocks Offering Selective Opportunity

Industry Overview

The Zacks Oil and Gas - International E&P industry consists of companies primarily operating outside the United States and focused on the exploration and production (E&P) of oil and natural gas. These firms find hydrocarbon reservoirs, drill oil and gas wells, and produce and sell these materials to be refined later into products such as gasoline, fuel oil, distillate, etc. The economics of oil and gas supply and demand are the fundamental drivers of this industry. In particular, a producer’s cash flow is determined by realized commodity prices. In fact, all E&P companies are vulnerable to historically volatile prices in the energy markets. A change in realizations affects their returns on drilling inventory and causes them to alter production growth rates. These operators are also exposed to exploration risks where drilling results are uncertain.

3 Key Investing Trends to Watch in the Oil and Gas - International E&P Industry

Geopolitical Risk and Operational Disruptions Remain Elevated: International E&P operations face persistent geopolitical and security-related risks that can disrupt production with little warning. Regional conflicts, export interruptions, regulatory uncertainty, and infrastructure vulnerabilities all introduce volatility that is difficult to hedge. Even temporary outages can delay cash receipts, increase costs, and complicate planning. These risks are often outside management’s control and can offset operational gains. For investors, this adds a layer of uncertainty that does not exist to the same degree in more stable producing regions, potentially justifying higher risk premiums and limiting valuation upside.

Capital Discipline and Cash Flow Focus Improve Industry Resilience: International E&P operators are increasingly prioritizing cash flow stability over aggressive volume growth. Across regions, companies are emphasizing disciplined capital spending, focusing on lower-decline assets, and directing excess cash toward balance sheet strength rather than expansion at any cost. This shift reduces sensitivity to short-term commodity swings and lowers financial risk during volatile pricing cycles. Many international producers also benefit from exposure to premium-priced markets outside North America, which can improve realized pricing and margins. As debt levels fall and capital efficiency improves, the industry becomes more resilient, offering steadier returns even in uncertain macro environments.

Delayed Growth Projects Push Cash Flow Inflection Further Out: While international portfolios often hold long-life resources, the path to meaningful production growth can be slow. Regulatory approvals, infrastructure build-outs, and project sequencing frequently stretch timelines, delaying free cash flow inflection points by several years. In the interim, new activity may only offset natural declines rather than drive growth. This dynamic can test investor patience, especially when capital is tied up without near-term returns. If commodity prices soften before projects fully ramp, expected economics may weaken, reducing the long-term value of these international developments.

Zacks Industry Rank Reflects Bearish Outlook

The Zacks Oil and Gas – International E&P industry is a six-stock group within the broader Zacks Oil - Energy sector. It currently carries a Zacks Industry Rank #192, which places it in the bottom 20% of 243 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates challenging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming pessimistic about this group’s earnings growth potential. While the industry’s earnings estimates for 2025 have gone down 159.5% in the past year, the same for 2026 have fallen 104.2% over the same timeframe.

Despite the dull near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.

Industry Underperforms Sector & S&P 500

The Zacks Oil and Gas - International E&P industry has fared worse than the broader Zacks Oil - Energy Sector as well as the Zacks S&P 500 composite over the past year.

The industry has gone down 32% over this period compared with the broader sector’s increase of 7.5%. Meanwhile, the S&P 500 has gained 14.3%.

One-Year Price Performance

Industry's Current Valuation

Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of non-cash expenses.

On the basis of the trailing 12-month enterprise value-to EBITDA (EV/EBITDA) ratio, the industry is currently trading at 6.33X, significantly lower than the S&P 500’s 18.58X. It is, however, above the sector’s trailing 12-month EV/EBITDA of 5.46X.

Over the past five years, the industry has traded as high as 9.60X, as low as 2.80X, with a median of 4.53X.

Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio (Past Five Years)

3 Oil and Gas - International E&P Stocks to Watch

Vermilion Energy: Vermilion Energy is a globally diversified producer with core assets in Canada’s Deep Basin and Montney, complemented by operations across Europe and Australia. This mix provides exposure to premium gas markets while keeping cash flows balanced and decline rates low. The Zacks Rank #3 (Hold) company prioritizes steady production, sustainable free cash flow and disciplined capital use, with a clear focus on strengthening its balance sheet before accelerating shareholder returns.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent updates highlight improving operations and a deep drilling inventory, though meaningful free cash flow growth is expected later in the decade. Canada now anchors production, supported by long-life assets and existing infrastructure, while European gas offers attractive economics and pricing upside. As leverage falls, Vermilion expects to increase buybacks and other return-of-capital measures over time.

The Zacks Consensus Estimate for 2025 revenues of the company indicates 13.4% growth. Vermilion Energy’s shares have lost more than 7% in a year.

Price and Consensus: VET

VAALCO Energy: VAALCO Energy, headquartered in Houston, is an independent oil and gas company with operations spanning Gabon, Egypt, Côte d'Ivoire, Equatorial Guinea, Nigeria and Canada. With more than 90% of output weighted toward oil, VAALCO concentrates on acquiring, developing, and producing energy assets, with a strong emphasis on African and Canadian markets.

Its portfolio includes offshore and onshore assets, alongside exploration acreage in Gabon and Côte d'Ivoire, and development projects in Equatorial Guinea, driving growth and long-term value creation. This Zacks #3 Ranked firm has a Value Score of A. VAALCO Energy’s current market cap is roughly $366 million.

Notably, over the past 60 days, the Zacks Consensus Estimate for the company’s 2025 earnings has moved up 50%. VAALCO Energy’s shares have lost around 25% in a year.

Price and Consensus: EGY

Genel Energy: Genel Energy is an oil and gas producer focused primarily on the Kurdistan Region of Iraq, with additional exploration exposure in Oman and Somaliland. Listed in London in 2011, the company operates assets across four core fields, building its strategy around responsible operations, stable production, and long-term value creation rooted in clear corporate priorities.

The business rests on a strong balance sheet and disciplined capital use, supporting resilient cash generation even in volatile conditions. Management aims to diversify cash flows through new production while maintaining low operating costs and net cash strength. As this base is reinforced, Genel plans to move steadily toward restarting a regular dividend and delivering more consistent shareholder returns.

The Zacks Consensus Estimate for 2025 earnings of the company indicates 78.6% growth. Valued at just over $220 million, #3 Ranked Genel Energy’s shares have gone down around 16% in a year.

Price and Consensus: GEGYY

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This article originally published on Zacks Investment Research (zacks.com).

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