On Dec 24, Zacks Investment Research downgraded upstream energy firm Triangle Petroleum Corporation (TPLM) to a Zacks Rank #4 (Sell).
Why the Downgrade?
Operating environment and future growth prospects seem week for Triangle Petroleum, as reflected by the decreasing earnings estimates for the Denver, Colo.-based company. Over the last 30 days, the Zacks Consensus Estimate for the fourth quarter of fiscal 2014 (three months ended Jan 31, 2014) has decreased 12.0% to 22 cents per share. Moreover, the Zacks Consensus Estimate for fiscal year 2014 is 76 cents, down 6.2% over the same timeframe.
On Dec 9, 2013, Triangle Petroleum released lower-than-expected fiscal third-quarter 2014 (three months ended Oct 31, 2013) earnings. Earnings per share – excluding one-time items – came in at 18 cents, lagging the Zacks Consensus Estimate of 24 cents. Significant increase in operating expenses affected the results. Operating expenses were recorded at $71.4 million during the third quarter, reflecting a substantial hike of 225.6% from the year-ago period.
Finally, Triangle Petroleum is a small cap firm and has to largely rely on outside source of capital. The company may find it difficult to gather capital for financing its growth projects.
Stocks that Warrant a Look
While we expect Triangle Petroleum to perform below its peers and industry levels in the coming months and see little reason for investors to own the stock, one can look at better-ranked players in the oil and gas exploration and production sector like Harvest Natural Resources Inc. (HNR), Clayton Williams Energy Inc. (CWEI) and Abraxas Petroleum Corp. (AXAS). Harvest Natural and Clayton Williams Energy retain a Zacks Rank #1 (Strong Buy), while Abraxas Petroleum sports a Zacks Rank #2 (Buy).