An update on what we are looking at this weekend for our Saturday and Sunday reading: uranium, uranium, uranium! Really hope that readers get the idea of what we want to start to move into once the pullback is complete after the recent run-up and we will probably do a special write-up for that as a stand alone article (not in our daily article) but we will alert readers here once that is published so that you do not miss it.
Commodity prices this morning are as follows:
Gold: $1668.60/ounce down by $1.30/ounce
Silver: $31.73/ounce up by $0.008/ounce
Oil: $96.33/barrel up by $0.38/barrel
RBOB Gas: $2.8542/gallon down by $0.0087/gallon
Natural Gas: $3.478/MMbtu up by $0.032/MMbtu
Oil & Natural Gas
Regarding some of our big winners in the Utica and other plays across the country we find ourselves wanting to be holders of the shares for the foreseeable future. Yes one could trade in and out of some of our favorites and do well should the timing be right, but our question is why risk it? With Gulfport Energy (NASDAQ:GPOR) and PDC Energy (NASDAQ:PDCE) ramping up drilling activities and production (and increasing sales dramatically so long as they do not have hiccups in 2013) the news flow should be picking up to provide a constant stream of positive drill results. The big initial move is probably over for Gulfport, but from here on out we will see the company ebb and flow but still outpacing the market as a whole and the shale plays in general.
One should think of EOG Resources (NYSE:EOG) as an example, although we view that as a higher quality play than the Utica players. In commodity plays individual stocks rally on discoveries and then languish as development sets in. In the oil and natural gas space this transition into production is much easier to pull off as a mine is not required and permitting and licensing is all standardized when compared to mining, thus the drop one usually expects is less severe on the pullback and certainly shorter in nature. As with all commodity stocks, and certainly oil and natural gas ones, a company must usually spend a bit of time growing into their multiple which is usually after they have finished locking up their land positions and getting land converted to HBP. The uptrend in our opinion with Gulfport will continue higher as they prove up various areas of their properties and then probably pull back until the company begins to move towards pad drilling (where they will be able to cut down on time and well cost while also boosting production and spending less getting production tied In to infrastructure).
Dahlman Rose upgraded Alpha Natural Resources (ANR) to a 'Buy' from a 'Hold' earlier this week, however it still seems that $10/share seems to be a resistance level that the stock has trouble breaking through and when it does it is unable to hold that level. Honestly we think that this is in part due to general market action and bad timing, but the fact that the stock cannot sustain a rally over that level indicates, at least to us, that investors are awaiting confirmation that the business has either hit bottom and turned or is in the process of turning. These questions are usually best answered by cold,hard data and with earnings season upon us it shall be interesting to see exactly what all of the coal players have to say about the outlook for the industry.
Chart courtesy of Yahoo Finance.
Molycorp (MCP) came under further pressure yesterday as it closed at $7.07/share after falling $0.81 (10.28%) on volume of 17.2 million. We had a commenter on one of our articles, as well as some emails and other messages of the same viewpoint, that this should have been bought on the weakness from the prior day. Our view was that investors needed to let the analysts come out and issue their new guidance and most importantly readers needed to let the company get the offering priced. Well as we write the company just priced the offering and it is for $6.00/share and needless to say the stock is taking a hit in pre-market trading. Currently the stock is only down 5%, but we still have not seen analysts revise their outlook on the company and we wonder if this is due to the fact fellow Wall Streeters are attempting to get this secondary closed (which is a tough sell to be sure).
Disclosure: I am long GPOR, PDCE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.