There’s a massive disconnect playing out in the energy markets right now — and very few investors seem to be paying attention.
Oil prices have cooled off in recent weeks…
West Texas Intermediate (WTI) is sitting around $65 a barrel after a string of geopolitical headlines faded and traders turned their attention back to interest rates and slowing global growth.
Fair enough. The market moves fast, and investor sentiment is as fickle as ever.
But here’s the thing: just because oil is down today doesn’t mean it’s going to stay there…
In fact, with tensions still simmering in the Middle East, shipping disruptions flaring up, and a looming supply crunch on the horizon, we could be on the verge of another sharp oil rally.
Some analysts are already warning that if conflict escalates — especially in the Strait of Hormuz — oil could spike to $90, $100, or even higher in a matter of days.
And when that happens, a lot of investors are going to realize they missed the boat.
Because while the big oil names will certainly benefit, the real upside lives in the small-cap producers…
We’re talking about lean, U.S.-based companies with low-cost barrels and explosive leverage to price.
The kind of names that are already wildly undervalued at $65 oil — and could go vertical if prices shoot higher.
That’s where Prairie Operating Company (NASDAQ: PROP) and a few other forgotten names come in…
Oil’s Not Dead. It’s Just Coiling.
Let’s zoom out for a second.
Yes, oil has pulled back. But the reasons for the pullback have little to do with long-term fundamentals…
Demand hasn’t cratered. Inventories aren’t surging.
If anything, supply is still razor-thin, and many U.S. producers are holding back on growth to maintain discipline and protect margins.
What we’re looking at is more of a pause — a breather — before the next leg higher.
Meanwhile, the world’s geopolitical landscape is still very much on edge…
Any spark — an Israeli airstrike, an Iranian naval blockade, even another Red Sea skirmish — could light a fire under crude.
And because supply is already so tight, the reaction could be fast and violent.
That makes now a great time to be looking at the stocks that haven’t priced in any of that upside yet.
Prairie Operating Company: The $50 Million Gusher
Let’s start with Prairie.
This is a small-cap oil and gas producer operating in the Denver-Julesburg Basin — one of the most prolific shale basins in the country.
They’re not flashy, but they’ve got prime acreage, growing production, and a smart, cost-efficient game plan.
What they don’t have? A fair valuation.
Prairie’s entire market cap is still under $50 million…
Which is absurd when you consider what kind of revenue and cash flow this company could produce if oil prices bounce back into the $80–$100 range.
Right now, analysts expect Prairie’s current drilling plan to bring in tens of millions in revenue annually, with healthy operating margins and minimal debt.
In fact, even with WTI at $65, that makes PROP one of the cheapest stocks in the energy space — trading at just 2–3x forward EBITDA by some estimates.
If oil moves higher, those cash flow numbers start compounding fast.
This is what makes small-cap oil stocks so exciting…
They don’t need a $120 barrel to deliver monster gains. A simple return to $75–$85 is enough to double or triple projected earnings.
And when investors come rushing back to the sector, tiny names like PROP tend to move first — and hardest.
USEG: The Oil Cockroach
Another name that’s been completely ignored is U.S. Energy Corp. (NASDAQ: USEG).
This company operates across several key basins, including the Permian, Williston, and Powder River — all rich with high-margin barrels.
USEG is small, nimble, and battle-tested.
They’ve weathered low oil prices before, and they’re still standing — debt-free and generating positive cash flow. That’s a huge deal, especially for a sub-$100 million market cap company.
With oil around $65, the market is valuing USEG like it’s on life support.
But their breakevens are well below that level, and their production base is already built to scale.
If oil rebounds, even modestly, USEG becomes a cash machine. That kind of asymmetry doesn’t last long once Wall Street notices.
Ring Energy: Texas Tea on the Cheap
Last up is Ring Energy (NYSEAMERICAN: REI).
This one’s a little bigger — but still well under the radar.
Ring has built a solid base of operations in the Permian and Central Basin Platform regions of Texas, and it’s quietly been improving its balance sheet and cranking out free cash flow.
At $65 oil, Ring is still profitable. At $85 oil, it could be a rocketship.
Right now, Ring is trading around 2.5x forward EBITDA — less than half the valuation of many mid-cap peers. That kind of discount doesn’t make sense if you believe oil is going higher.
And unlike the majors, Ring doesn’t need billions in new infrastructure or massive new discoveries to grow.
It’s already producing, already generating cash, and ready to ride any rebound.
The Window Is Still Open
This is the setup that contrarian investors dream about…
Oil is out of favor. Energy stocks are oversold. Small-cap valuations are ridiculous.
And the market is distracted by tech hype, crypto swings, and whatever the Fed might do next.
But here’s the reality: the world still runs on oil.
And when the next disruption hits, it won’t be the Teslas and ChatGPTs that spike.
It’ll be the crude producers. Especially the ones that are already pumping barrels in America’s most productive basins.
Prairie. USEG. Ring.
These aren’t speculative explorers. They’re revenue-generating, asset-backed businesses that just happen to be mispriced because the market’s looking the other way.
For now.
Get In Before the Spike
When oil moves, it moves fast. We’ve seen it happen time and again.
Prices climb $10–$20 in a week, and suddenly every talking head on CNBC is screaming “buy energy!” like it’s some kind of revelation.
But by then, the biggest gains are already gone.
That’s why now — while oil is cheap, sentiment is low, and valuations are absurd — is the time to be buying.
You don’t need oil to go to $150. You just need it to go back to where it was a month ago.
And if it does, these small-cap producers could be the best-performing stocks in the entire market.
Don’t wait for Wall Street to wake up. The great repricing is coming. And the time to get ahead of it… is now.
Disclosure: Neither The Investment Journal nor the author have a financial position in any of the companies mentioned in this article. An affiliate of The Investment Journal has been retained for marketing services by Prairie Operating Company (NASDAQ: PROP) between July and August; however, this is not a sponsored post. This content is for informational purposes only and should not be considered investment advice or a solicitation to buy or sell any securities.