An under-$10 stock in the oil and gas complex that’s setting up to trigger a near-term breakout trade is Lone Pine Resources (LPR)
An under-$10 stock in the oil and gas complex that’s setting up to trigger a near-term breakout trade is Lone Pine Resources (LPR), an independent oil and gas exploration, development, and production company with operations in Canada within the provinces of Alberta, British Columbia, Quebec and the Northwest Territories. This is another stock that’s been hammered by the sellers so far in 2012, with shares off by 75%.
5 Takeover Targets to Buy Before Wall Street Finds Out
If you take a look at the chart for Lone Pine Resources, you’ll see that this stock bottomed at a low of $1.09 a share in August after falling from over $5 a share from the previous months. Following that low, shares of LPR have started to rebound strong to a recent high of $1.86 a share. During that rebound, shares of LPR have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed LPR within range of triggering a near-term breakout trade.
Market players should now look for long-biased trades in LPR once it manages to trigger a break out above some near-term overhead resistance levels at $1.68 to $1.86 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 802,580 shares. If that breakout triggers soon, then LPR will have an excellent chance of re-testing or possibly taking out its next major overhead resistance levels at $2.43 to $2.80 a share. Any high-volume move above $2.80 will put $3.50 to $3.80 into range for LPR.
Traders can look to buy LPR off any weakness as long as it’s trending above its 50-day at $1.48 a share with strong upside volume flows. You could also buy off strength once LPR takes out those breakout levels with volume, and simply use a stop just below its 50-day at $1.48 a share.
WHY LPR would be an attractive oil and gas BUY for COP:
We have a well-balanced portfolio of oil and gas properties, consisting of premium priced light oil and low-risk natural gas resource plays, as well as significant undeveloped potential associated with two shale gas plays. Our primary area of focus is in the Western Canadian Sedimentary Basin, which includes our Evi area in the Peace River Arch and our Narraway/Ojay and Wild River fields in the Deep Basin. In addition, we own significant acreage in the Utica Shale in Quebec and the Liard Basin in the southwest portion of the Northwest Territories, which are shale gas prospects that we believe have significant future development potential.
Starting in the fourth quarter of 2009 and through December 31, 2011, we have repositioned our asset base, divesting approximately $159 million in non-core or non-operated oil and gas properties, and investing approximately $138 million on new asset and undeveloped leasehold acreage acquisitions primarily in the Evi area and the Narraway/Ojay fields, both of which we believe have strong future growth potential.
As of December 31, 2011, we had approximately 57,382 net acres in and near the Evi field, located in the Peace River Arch area of northern Alberta. This position offers us a significant development opportunity for premium-priced light oil. Through December 31, 2011, we have drilled a total of 72 horizontal wells in the Evi area since we entered the area in 2006. In 2011, we drilled 47 gross (47 net) horizontal wells in the Evi area, and we plan to drill up to 48 additional horizontal wells in the Evi area in 2012. Our working interest in all of the wells drilled in 2011 is 100%. For the 34 of the 2011 wells that have been brought on production, the average maximum recorded initial peak twenty-four hour production rate was approximately 329 Bbls per day. For the 30 of the 2011 wells that have been on production for at least 60 days, the 60-day average production rate was approximately 184 Bbls per day. For the 23 of the 2011 wells that have been on production for at least 90 days, the 90-day average production rate was approximately 179 Bbls per day. In the fourth quarter of 2011, we had average daily net sales volumes of 3,605 Bbls per day from production in the Evi area. We believe we can ultimately enhance production rates and recoveries in the Evi area through further development drilling, including further downspacing of our acreage, completion optimization and secondary recovery techniques, such as waterflooding. In 2012, we plan to focus our capital budget on light oil by allocating approximately 80% of our total capital budget, or approximately $165 million, to the Evi area.
Deep Basin Area
As of December 31, 2011, we had approximately 157,779 net acres in the Deep Basin, including approximately 121,088 net acres in the Narraway/Ojay fields, located in Alberta and British Columbia, and approximately 12,853 net acres in the Wild River field, located in the southeast portion of the Deep Basin. In 2011, we drilled and completed 6 gross (5.5 net) wells in the Narraway/Ojay fields, including 1 gross (1 net) horizontal well. In the fourth quarter of 2011, we had average daily net sales volumes of 66 MMcfe per day from production in the Deep Basin. Our development of these assets is primarily focused on our Narraway/Ojay and Wild River fields. Geologically, these fields have a minimum of ten different stacked producing intervals, and we are able to produce from multiple intervals within an individual wellbore. We currently have no significant near term expiries or drilling obligations in the Deep Basin, which has allowed us to be flexible with our 2012 capital budget and defer significant natural gas investment until natural gas prices improve from their existing multi-year lows. In 2012, we are allocating approximately 7% of our total capital budget, or approximately $15 million, to the Deep Basin where we plan to focus primarily on recompletion opportunities.
As of December 31, 2011, we had approximately 240,320 net acres in Quebec that are prospective for the Utica Shale. Natural gas produced from this area is in close proximity to major markets in Canada and the northeastern United States, which generally provides for premium product pricing compared to the NYMEX Henry Hub pricing. The Utica Shale is relatively shallow compared to other shale plays in North America, which we believe will provide for an economic advantage relative to the drilling costs associated with developing the resource.
As of December 31, 2011, we had approximately 52,995 net acres in the Liard Basin, located in the Northwest Territories, that are prospective for the Muskwa Shale. This is a newly developing natural gas shale play adjacent to the producing Horn River Basin. We believe that our acreage in the Liard Basin is analogous to the Muskwa Shale in the Horn River Basin. Our acreage is located in close proximity to a pipeline in the Northwest Territories providing for the sale and distribution of any natural gas produced. In the third and fourth quarters of 2011, we re-entered and recompleted a well in the Liard Basin and intend to submit an application to the National Energy Board to potentially continue the lease for up to 21 more years.