Company specific events are what has driven gains lately, and they shall continue to until we have a resolution passed in Washington which protects the nation's credit rating while also giving investors an idea of what the laws will be moving forward. At this time we have no idea which laws will be altered and which will remain the same and it has caused many to stop in their tracks until there is a better understanding of what the investing environment will look like. We would continue to look to the oil and natural gas players to provide the more predictable gains with their news flows laid out on a timeline for investors already.
Oil & Natural Gas
For those not paying attention, SandRidge Energy (SD) continues to rally off of the lows set during their latest earnings release. Selling assets when you do not need to sell assets is always the way to maximize the value for shareholders and we do like the plan for the reallocation of that capital. Volume came in Friday at 22.5 million shares and that continues a trend of strong volume for the stock during this rally, something we find bullish. Shares are approaching the $6/share threshold and with oil prices having stalled recently we think that the company will need a sale of assets in order to push shares up much higher from these current levels.
The rally in Gulfport Energy (GPOR) shares was very impressive last week. The stock did fall within trading sessions, but we never saw a severe pullback after the dramatic rise higher. In fact, investors saw the stock set a new 52-week high on Friday just when it appeared that the old 52-week high may have been set to act as a resistance level. We would expect a pullback this week, simply because we have risen so much in such a little time.
The strong results that Gulfport has been reporting has begun to carry other names higher as well, especially those that have yet to report any results. One name which has risen dramatically on the heels of Gulfport's news is PDC Energy (PDCE) which has seen shares rise to $38/share from recent lows of $28/share which were set after the company disappointed investors with production news from another play and news that they did not receive an attractive enough offer to enter a joint venture in the Utica.
The failure of finding a joint venture partner we thought was good news for the company as they would get to keep more of the Utica to themselves, something we think will cause investors to look back and shake their heads at the silliness of pushing shares lower on fears of capital expenditures while not valuing having full ownership of the Utica production. This should end up being one of the better investments in the play.
With all of the good news and vibes, as well as new production, flowing in the Utica one has to seriously wonder what is going on at Chesapeake Energy (CHK) as shares continue to trend lower. Friday saw the shares close at $17.03 after falling $0.50 (2.85%) which keeps the shares near their six month lows. The property sales have slowed and the company is making odd statements regarding the Utica oil window - an area where the company has a large acreage position. Investors saw the $17/share area provide support on Friday, but if the company keeps talking down the value of large holdings we would not expect $17 to hold, or $15/share for that matter.
For readers looking for a quality name in the oil and natural gas sector, we would like to direct your attention to Apache (APA) which saw shares close at $77.09/share on Friday. Shares are currently trading near their 52-week lows and in our experience when Apache is down relative to the rest of the industry, it is most certainly a buy. The company has a great portfolio of properties and it is our opinion that an investor looking for another name for the retirement portfolio or child's college savings should look at the upside opportunity that Apache offers at these levels.
Disclosure: I am long GPOR.