Have been out of MPO and don't think I'll go back, but it could end up like Forest Oil, First Reserve combined their private Sabine with it and FST got a pop. I would suspect that happens here as well, doesn't FR have another Anadarko co, believe its Templar. Might get $6 out of it. Does seem the downside is limited.
Below, a comment that maybe sums where we are now in energy. The q reports imo look very strong, good results and getting better. Could see 20% or more upside if oil at $100 is assumed. Listening to Yellen, still fears deflation, rates to stay low for maybe a few years. The market multiple could go to 20x easily, S and P 500 to 2500. The idiots in DC are still fighting the last war. Will need to get off the train the moment we feel it will never end, doesn't seem now is the time
Nothing in Q1 results / outlook so far that makes us think outperformance will be given back…feels like could see more chasing of energy exposure.
I didn't answer your question about EOX, I had figured with the growth, they could be $10+ in a year, assuming oil price stability. Only issue is dilution, spending $150mm on land, would be good if it was increased interests in prospects they already have. They are spending $400mm on capex and the market cap is $600mm, If oil crashes, the smaller cos that need capital will not fare as well. Seems like a good small cap to me. Compare to PDCE, they have most of their acreage held by production so they don't have the pressure to maintain capex if something happened.
I think ROSE is a good bet at mid $40s, will do 60k+boe/d this year, seems cheap, well managed, Delaware Basin prospects should boost stock. Think EOX is a good small Bakken choice, I sold, just a matter of I like others better. PDCE, I thought they were on track and have upside both in the Wattenberg and the Utica, looks like everything they own can produce 60%+ returns, 3000 well inventory. PDCE is still my no 1 buy. OAS, great company. ECA buying EF reserves, Devon had a great report, all of the midstream cos are looking good. Seems the most important factor is the oil price, if it stays around $100, the whole sector will do well. PXD had a great report, EOG had one also. SN is a good bet on the TMS. Seems GDP will do well with the play, even after the run up. I am fully invested, own many time more midstream cos than e and p. I think we are not in bubble territory for energy but seems we could get there if $120 oil starts to be the accepted price. As for the market, the simple choice is do you buy a 10yr T note and make 2.6% or do you buy an MLP that pays 4%+ and will grow high single digits for a few years. 12% return vs 2.6%, seems easy to me. The discussion about whether stocks are over valued seems silly, if you don't do stocks, where do you put your money. Everyone's been waiting for high interest rates since the crash and we may be waiting for several more. And silently the federal deficit seems to be coming under control, that's a story that doesn't get much press. I've been waiting a couple of years for a major downturn to go into margin and I'm still waiting, when I do it, it will probably mean the end of the run is near.
Don't know anything about Martin but the pipeline is a good asset, believe the other 80% is owned by Chevron and it will be in demand. Would think it's accretive to cash flow. APL can probably make more increasing plant capacity in the Permian for Pioneer. Another one I bought today, more of, is CEQP, should be a good bet for midstream over the next couple of years. Should be ex div tomorrow.
Saw a report today suggesting that the world will need $125 price to supply the demand. Hard to forecast long term, but I think I come out in the same place, about the only place we are finding cheap reserves is the shale plays here in the US, the rest of the world is struggling. Investors seems to be discounting a big fall in oil price, will see. I did buy some more EOX today. A cheap value for 85k acres of Bakken, it seems. Good well results would be nice today.
MWE has several projects coming on line so co specific. They will be the franchise to own in the NE. Seems you are targeting good cos. Both MWE and ATLS have the potential of doubling in three years. I really don't have a good feel for EOX's report Monday, KOG lowered guidance and ended up yesterday. Good results on wells could move it up. Think the market would shrug off winter related volume miss. If EOX moves down, would probably buy more, if it heads up Monday will stay put.
Your strategy of trading among the e and p s, I have been doing the same, with good results, and I'm a lousy trader. It will work until oil drops $10 in a week. At $100 oil, the whole sector is undervalued, saw a comment that the mid caps are reflecting high $70s oil. I will probably do it at least through the earnings season and wait to see what happens. If investors every believe in $100 oil longer term, the whole group will be up a bunch. Companies like OAS will do well, all of the Bakken players will do well, DNR will do well. The Permian players will be up, NIobrara, probably can't go wrong if you are in good companies. The TMS is 90% plus oil so it will be hot and GDP will do extremely well.
Looked at American Eagle briefly, probably worth looking at further. Couple of things that would put EOX over it, they are out of the core Bakken, just not that familiar with the difference although the type curves look similar. The other is capex funding, spending $80mm and cash of $50 million, not too much difference. EOX is spending $300mm, $120 for land, and they look like they are fully funded this year and maybe next. Could be 6.5kboe/d by the end of next year, they are just further along than AMZG. EOX took the hit I think with the convert, which might make it a good time to buy. I did buy some yesterday. Monday release should be interesting. Your comments about ATLS, if you are using options, think it's going to take a year to fully realize the value but a good bet. At a $4 plus dist and 4% yield, that's a $100 stock, even at 5%, you get almost a double. Also, MWE looks like a great bet for two years out. The go ex div on Monday and report mid week. It is pure midstream in the Northeast, could be the best franchise in the sector. You might want to take a look at Sanchez SN, I have bought it recently, they report next week, think it is Wednesday, cheap on a cash glow basis and a position in the Tuscaloosa Marine Shale and a good EF position, the TMX geology is supposed to be similar to the TMS, GDP is probably the best and with a few good well results, could continue to apprecitate. Problem with GDP is the run up, could linger even with good results. I would buy it on a pull back, but not sure it's coming. With 300k acres in a major play, $20 is going to look cheap.
ATLS is valuable because they are the general partner of ARP and ATLS, they get incentive distribution rights of up to 50% of cash distributed, that's the nature of the general partner. My feeling is you always buy the general partner for that reason, although I did buy some ARP for the 10% yield. Remember that ATLS is an MLP and you have the k1 tax issues so may not be for you. A bunch of people stay away from it for that reason. And ATLS is a hybrid, midstream through their ownership of APL and e and p through ARP.
OAS is a great co, have owned them before, probably will continue to do well. COG, same comment. I am trying to find smaller cos that maybe have bigger growth rates. I haven't looked at either in a while. PDCE has 850 mm barrels of potential reserves and I think will be over a $100 in a couple of years, the growth in the NIobrara and the Utica. They will go from 28kb/d to high 30s to mid 40s/d over the next couple of years. They have 3000 wells to drill in the Wattenberg field. ROSE is probably a good choice as well with their move to the Delaware Basin. You may want to look at SM, they look very cheap, 4x ebitda and good growth in the EF, Permian, Bakken and a new play in the Powder River. Too cheap for the assets, at an avg industry multiple, should be $100+, also low debt, 1x ebitda. Seems that if oil stays at $100, there are several cos that are undervalued at the moment, and with the gas strength. Even DNR looks cheap but not sure why investors would put money here vs other cos with better growth rates.
If I didn't own so much of ATLS/ARP, I would be buying ATLS now. Still think a couple of years from now, it's an easy double. A while back the forecast for 16 dist was $5, that's probably too aggressive but $4 at a 4% yield gets you to a $100. ARP should do well and APL will do extremely well trying to keep up with PXD in the Permian and the activity in the mid continent. My favorite co by far is still PDCE, Birdog still doesn't like it, BCEI will do well there also. Bought SN for their cheapness, good EF results and a position in the TMS. If GDP retreats, would buy it, with 300k acres in the TMS, they will be a $30, $40 stock. Bought EGN yesterday and was up $6 this a m and couldn't keep it, but it has a good position in the Midland Basin and the Delaware, which may be one of the next hot spots. Am watching BBG for their Niobrara position, could be a great play and their Uinta. And AREX, they have 140k acres in the So Midland that could have a billion barrels of reserves and they are less than a billion enterprise value. EPE just bought more acreage there, should be a great read through for AREX. I sold all of MPO, just other geologies that look better. ROSE could be a great bet once they start having success in the Delaware. That's about it, ATLS is a great buy at $41, imo.
Birdog,don't know if you still own WLL. Looked at their pres, the DJ is a big deal for them. A comment that their inventory of wells could double to 6600 locations with downspacing. And type curves of 420kboe eurs return 80% at $90 oil. NPV of $6 mm per well, on 6600 wells, that's $40 billion of value. The Niobrara seems to be in the top tier of plays. PDCE, BCEI and even BBG could be drilling for years.
Don, bought some EOX today, looks a cheap play on the Bakken. Funded for '14. Reports on Monday.
Another one that has been a head scatcher for me, AREX. They have 140k+ acres in the So Midland Basin. EV of less than a billion $. They have 2000+ wells of inventory in the multiple Wolfcamp zones. Debt is manageable, only a $200 mm. I bought some. The thing that got my attention is looking at EPE, the So Midland Basin is one of their cores, almost the same amount of acreage, some is contiguous with AREX position. CS valued their So Midland asset at $13 per share or around $3.2 billion, and suggested that value could go up. Seems the geology should be around the same, EPE may have some somewhat north of AREX but a lot is next door. $3.2 billion vs $970 mm of EV for AREX is a big difference. Issue has been So Midland returns are in the 30 to 40% range vs 50% in the No Midland area but seems the discount applied is too steep or CS got its valuation of EPE wrong. AREX will increase prod 40% this year. The see a billion barrels of recoverable reserves from the asset.
cbd, found another small cap, looked at it a while back. Bakken operator, just did a $140 million convert, using CS numbers. They will increase production 110% this year, 90% next year and 60% in '16. Ebitda of $204mm in '16, at 8x, stock should be $15. The debt should only be 2x ebitda in '16. 75k acres in the Bakken, 10.6kboe/d in '16. Market cap around $475mm plus convert, $615 plus $400mm debt in '16. A billion EV at 10k b'd, $100k/kboe/d. CS has a NAV of $11 on it now. Co claims Bakken acreage is less than $4k per acre vs peers of $8k+. CS sees $3 of proved developed net of debt and $8 of potential, 15% gas.
Playing around with Wattenberg potential, assume 600k bs per well and 3000 wells in multiple zones, and $12mm NPV, that's $36 Billion of undiscounted value for PDCE. At $100 oil and $5 gas, the stock will look like a steal in the $60s.
Noble reported, they show results on one pad, wells testing 24 well spacing per section, and standard length, saying all wells tracking 600kboe EURs. Good read through for PDCE. Betting the reserve potential continues to increase. And the extended reach wells, 750lboe EURs, 190% BT returns. Goldman increased targets on e and ps, probably helping BCEI today.
Believe they did say the report was to be released 4/24. I do agree that they are smoke but coupled with operational weakness, they have driven stocks down more than they would have otherwise, but they have mostly recovered. KMI is probably still undervalued because of it. The APL announcement of 109% coverage probably diffuses some of the criticism. I'm viewing it as an opp to buy more, but going for ATLS. I remember years ago the analyst that said the same thing about KMP when no one knew what an MLP really was. And they are at it again. Just short term noise.