We thought for sure yesterday was going to be rough for our portfolios due to the weighting that Gulfport enjoys, however we were pleasantly surprised with its price action (more below) and the effect its purchase had on the rest of the players in the area which simply added to the move higher. With yesterday's sell off into the close, it is possible we saw a blow-off of sorts with a short-term top, but if that is the case we can most certainly wait as the other Utica names will begin to have news ramping up. We think that the Utica and Eagle Ford exposure will carry us into the 2013 year on a high note.
Oil & Natural Gas
We were impressed yesterday with the price action in Gulfport Energy (GPOR) which after opening lower for the day moved strongly higher. The stock hit another fresh 52-week high, all-time high and managed to break above $40/share before selling off into the close for a minimal gain. The company has had many good days recently, but this one may have been the most impressive as the stock was reacting to news that the company would be issuing shares to pay for the $300 million land acquisition they announced the night before. Also yesterday the company announced that they would be adding $50 million in notes to a previously announced debt offering and S&P announced that this would not affect their overall rating (see S&P statement here).
Breaking this morning is that the company announced the pricing on the offering at $38/share while upping the 9 million share figure to 11 million shares and also increasing the overallotment from 1.35 million shares to 1.65 million shares. The offering should close on December 24th and raise about $400 million. See this morning's release here.
Kodiak Oil & Gas (KOG) has continued to hold strong in the $9/share area and we are left to wonder how high the stock can go when we actually have oil prices heading higher. A few things we want to point out this morning deal with the Bakken players and their high proportion of oil production. First they have great margins and although the wells do cost more than in other areas we think it is well worth it as wells have 800-2000+ IP rates with almost all being oil and thus less volatile on the price swings. Some investors are curious why the oil names have hung in stronger than others in the industry, especially the wet gas and NGL names, and the reason is that oil simply replaces imports from other areas of the world and natural gas and NGLs are simply flooding the domestic market. We are now of the opinion that as oil prices recover, something we expect to occur in 2013, investors will see the oil focused shale plays rise far faster than the dry natural gas and NGL focused plays.
We were pleased to see Magnum Hunter Resources (MHR) rise yesterday, and the day before, as the oil sector seems to be ticking higher. The stock has had a few catalysts over the past couple sessions, with UBS raising their outlook and discussing possible asset sales and then Gulfport's move yesterday which effectively put a floor on Utica acreage in good areas. There are not a lot of small players focusing in the Bakken, Eagle Ford and Utica shale plays with decent property portfolios and hardly any with acreage in all three, but Magnum Hunter is one of them and that is something which we find bullish at this time. We are in a 100% invested position right now, but will be accumulating our contributions and distributions for our next move and we are moving this one up our list. It is not at the top, but it is now moved from our watch list to our buy list.
Thompson Creek (TC) caught a bid yesterday as shares rose $0.2497 (6.68%) to close at $3.9897/share with volume rising to 5.9 million shares. The last month the shares have been on fire, and yesterday even though gold stocks were down we saw Thompson Creek rise due to their exposure to copper and molybdenum. The recent price action resulted after the company's shares broke through $3/share, then $3.20/share and now it looks set to test the $4/share level it was unable to hold yesterday morning. Molybdenum stocks have done well recently and as the world economy recovers they shall continue to, it might be time for investors to begin to look into the sector for some exposure to a global recovery from slow growth next year.
Precious metals have come under fire in recent sessions and yesterday the entire complex got hammered as the rest of the market moved higher. Gold stocks were especially hard hit, but Silver Wheaton (SLW) did not fare much better. This is one of our favorite ways to play silver for those looking to escape the 28% collectibles tax rate while also avoiding to an extent the entity risk associated with individual silver plays. Yes the company is still exposed to production hiccups via their partners, but the risk is a heck of a lot lower than some of the other pure silver names out there which lack dividends and strong balance sheets. If we see further pull backs in the silver complex, we might have to pull the trigger on Silver Wheaton for a trade. Full disclosure, we do own physical silver.
Disclosure: I am long GPOR.