The market got a bit away from us on Friday as we were left behind by some of the uranium juniors we were watching and a few of our oil names opened strongly but finished with a whimper. It happens in the market and one must remain focused on the goals, so as we remain interested in these names we also want to stress our strict adherence to buying the proper entry levels. No need to chase stocks at this time, especially the juniors which are volatile in the first place. Patience.
Commodity prices this morning are as follows:
Gold: $1665.50/ounce down by $5.10/ounce
Silver: $31.65/ounce down by $0.308/ounce
Oil: $97.25/barrel down by $0.52/barrel
RBOB Gas: $3.0345/gallon down by $0.0191/gallon
Natural Gas: $3.297/MMbtu down by $0.004/MMbtu
Oil & Natural Gas
SandRidge Energy (SD) had an awful day on Friday with shares falling $0.46 (6.50%) to close at $6.62/share on volume of 26.3 million shares. The volume was higher than normal and the drop pretty dramatic as investors became concerned with the company's direction after hearing news of the production from one of the company's Miss Lime Trusts which had higher natural gas production than investors were expecting. This is something we are looking into as we already heard in prior conference calls that the play was looking a little more gassy than oily but this would seem to indicate an even more dramatic shift towards dryer production quicker in the lifecycle.
Chesapeake Energy (CHK) is also active in the Miss Lime play with a large acreage position so we will look to them for some sort of confirmation on this as well. If the play is gassier than anticipated and has a shorter production timeline for the oil phase in each well's life then both Chesapeake and SandRidge could have issues moving forward. We would suspect that SandRidge knew this prior to doing their Permian deal, so that gives us some comfort but we are still left to wonder about all this.
One of our stocks which we have discussed in depth over the past few months is EV Energy Partners, LP (EVEP). Shares traded up $1.00 (1.70%) on Friday to close at $59.80/unit and sadly the performance here has lacked. We thought this would be the crown jewel of our Utica assets but the sale of their holdings in the Utica has taken far longer than anyone expected, but the fact that the shares are moving higher recently and not lower gives us a little confidence. Also of importance to readers is that the company announced a distribution of $0.767/unit for the 4th Quarter of 2012. Thus far the distributions are the only thing which has made owning the units worthwhile.
The uranium stocks we had been watching fall back around our buying ranges suddenly popped on Friday in Canada. That was a bit disappointing as the stocks were quite close as we had discussed. Patience is a virtue in the industry and there is no need to pay up for these names here and now. One must simply be patient and disciplined and allow the names to fall into your designated buying area. For those in the US we think that two of the speculative names you need to look at are Uranerz Energy (URZ) and Crosshair Energy (CXZ). Uranerz is a soon-to-be producer in the US west and Crosshair is now focusing its sights on South American uranium exploration with their new property in Argentina.
We are bullish on the industry and think that quality names and smart speculative names will be the way to play the rally. US investors have a bit of an advantage over Canadian and Australian investors in that there are fewer names to choose from on the exchanges (Pink Sheets not included), which in the past has afforded some of these names the opportunity to really move higher. Over the next few months we will continue to bring readers some names to take on risk, but as we have indicated over the last few articles we are holders right now unless provided with an opportunity to enter a trade or investment at a level deemed "a deal".
Disclosure: I am long EVEP.