3 Energy Stocks Down 35% From Their Highs to Buy in 2026

The Oil/Energy sector endured a frustrating 2025 as oil prices stayed under pressure and the group badly lagged the broader market. Oversupply concerns, fading geopolitical premiums, and stagnant pricing pushed many investors to the sidelines. Yet, periods of deep pessimism have historically created opportunities for patient, contrarian investors looking ahead to 2026.

A closer look at select energy names crushed in 2025, including Drilling Tools International (DTI), KLX Energy Services Holdings (KLXE) and W&T Offshore (WTI), suggests that not all selloffs were driven by deteriorating business quality. For investors willing to lean into fear, several stocks trading well below prior highs may warrant consideration as sentiment and activity eventually normalize.

Contrarian Setup as Energy Falls Out of Favor

Energy was one of the market’s clear laggards in 2025. While the S&P 500 surged roughly 20%, the oil and energy group delivered only modest gains, reflecting a sharp disconnect between broader equity enthusiasm and energy market fundamentals. Crude oil is now trading below $60 per barrel, down roughly 20% for the year, underscoring ample supply and lack of strong upside momentum.

This backdrop weighed heavily on energy equities, many of which fell out of favor regardless of company-specific execution. Periods like this can create opportunities for contrarian investors, as negative sentiment spreads across the sector and stock valuations fall, even when individual companies continue to execute well.

When a Selloff Goes Too Far

Not every decline signals opportunity, but stocks trading at least 35% below their highs can attract investor interest when underlying business models remain intact. In 2025, much of the pressure on energy stocks stemmed from macro forces rather than company-specific breakdown.

When prices fall faster than fundamentals deteriorate, sentiment-driven selling can overshoot reality. For long-term investors, this disconnect can provide entry points ahead of a cyclical recovery, even without a near-term spike in oil or natural gas prices.

3 Stocks to Buy

Drilling Tools International: It is a Houston-based oilfield services company specializing in downhole tools, machining, and inspection solutions for horizontal and directional drilling. With a fleet of more than 65,000 tools and technologies such as Drill-N-Ream and RotoSteer, Drilling Tools International supports well construction and optimization across major U.S. basins. Its footprint includes 16 domestic facilities and 11 international locations spanning the Middle East, Europe, and Asia, with over 90% of 2024 revenues generated in the Western Hemisphere.

Founded in 1984, DTI has expanded through acquisitions and steady investment in patented technologies, growing its portfolio from 2 to 16 patented products. The company participates in roughly 60% of North American drilling rigs and continues to scale its global reach. Drilling Tools International’s strengthened balance sheet, expanded credit capacity, and resilient free-cash-flow profile reinforce its ability to navigate fluctuating activity levels while supporting future innovation and fleet growth. The company currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for 2026 earnings of DTI indicates 650% growth. Drilling Tools International's stock is still trading at a discount of around 38% compared with its early-2025 highs.

KLX Energy Services Holdings: It is an oilfield services company supporting onshore oil and gas producers across all major U.S. shale basins. KLXE provides drilling, completion, production and intervention services, including coiled tubing, wireline, flowback, pressure control and directional drilling. The Zacks Rank #2 (Buy) company operates through a nationwide network of service and support facilities, focusing on technically demanding wells.

KLX Energy Services differentiates itself through proprietary tools, in-house manufacturing, and a highly experienced operations team. Long-standing relationships with large producers support steady demand, while a vertically integrated model improves efficiency. Although activity slowed during the recent downturn, KLX Energy Services remains positioned to benefit as drilling and completion spending stabilizes and recovers.

The Zacks Consensus Estimate for 2026 earnings of KLXE indicates 14.5% growth. Investors can have KLX Energy Services stock nearly 80% below its January 2025 highs right now.

W&T Offshore: The company is an independent oil and natural gas producer with a long-standing presence in the Gulf of America. Public since 2005, W&T Offshore holds working interests in 50 offshore fields across federal and state waters and controls more than 600,000 gross acres. Its asset base features low-decline reservoirs, strong well productivity, and substantial remaining reserves, helping the company generate positive cash flow for over 28 consecutive quarters.

Founded in 1983, W&T Offshore has grown through targeted acquisitions and disciplined development. The Zacks Rank #2 company has completed roughly $2.7 billion in Gulf of America acquisitions since its IPO and maintains a drilling success rate near 90%, supported by deep technical expertise. With reserves of 248 million barrels of oil-equivalent and daily production of 35.6 thousand barrels of oil-equivalent in the third quarter of 2025, WTI continues to focus on cost reductions, reserve life extension, and a steady pipeline of organic and acquired growth opportunities.

W&T Offshore beat the Zacks Consensus Estimate for earnings in three of the last four quarters and met in the other, with the average being 27.1%. WTI shares remain more than 35% below their October peak.

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

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