Seeking Alpha
Long/short equity, insider ownership
Profile| Send Message|
( followers)  

The basic materials sector has been the worst-performing group over the recent one-year period with a loss of 1.7%.

(click to enlarge)

In this article I will feature three basic materials stocks that have seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

  1. The stock is purchased by three or more insiders within one month.
  2. The stock is sold by no insiders in the month of intensive purchasing.
  3. At least two purchasers increase their holdings by more than 10%.

1. Legacy Oil + Gas (OTCPK:LEGPF) engages in the acquisition, development, exploration, and exploitation of oil and natural gas properties in Canada.

(click to enlarge)

Insider buying by insider (last 30 days)

  • Paul Colborne purchased 81,232 shares on April 10-17, and currently holds 553,982 shares or 0.4% of the company. Paul Colborne is Chairman of the Board.
  • James Pasieka purchased 26,026 shares on April 17, and currently holds 26,026 shares or less than 0.1% of the company. James Pasieka serves as a director of the company.
  • Trenton Yanko purchased 6,050 shares on April 18-22, and currently holds 907,185 shares or 0.6% of the company. Trenton Yanko is President, Chief Executive Officer and Director of the company.

Insider buying by calendar month

Here is a table of Legacy Oil + Gas' insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
April 2013113,3080
March 201300
February 201327,5000
January 201360,0000

The month of April has seen the most insider buying this year.

Financials

The company reported the full-year 2012 financial results on March 18, with the following highlights:

Revenue$363.2 million
Net income$0.5 million
Net debt$485.6 million

Outlook

As a result of the acquisitions, and giving effect to production declines and timing of closing the acquisitions, Legacy increased its guidance for 2013 average production to 19,000 Boe per day (90 percent oil and NGL's) and increased its guidance for 2013 exit rate production to 21,500 Boe per day (91 percent oil and NGLs), representing a 20 percent increase over 2012 exit production. Royalties are expected to average 15.7 percent and operating and transportation costs are expected to average $16.25 per Boe. With the increased production and cash flow, Legacy expects to spend $310 million in capital expenditures in 2013.

Competition

The oil and natural gas industry is competitive in all its phases. Legacy competes with numerous other participants in the acquisition, exploration and development of oil and natural gas assets and in the marketing of oil and natural gas. Legacy's competitors include resource companies which have greater financial resources, staff and facilities than those of Legacy. Legacy believes that its competitive position is, on the whole, equivalent to that of other oil and natural gas producers of similar size and at a similar stage of development.

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. There are 15 analyst buy ratings, one neutral rating and zero sell ratings, with an average target price of $10.30. The stock is trading at a forward P/E ratio of 21.92 and the company has a book value of $10.21 per share. I believe the stock is a good pick below the book value.

2. Cathedral Energy Services (OTC:CETEF) provides drilling and completions services to the oil and natural gas industry in western Canada, the United States, and Venezuela.

(click to enlarge)

Insider buying by insider (last 30 days)

  • Cathedral Energy Services purchased 469,270 shares on March 25 -April 18, and currently holds 480,753 shares or 1.3% of the company.
  • Roderick Maxwell purchased 70,000 shares on April 19, and currently controls 195,000 shares or 0.5% of the company. Roderick Maxwell serves as a director of the company.
  • Jay Zammit purchased 6,000 shares on March 25, and currently controls 20,500 shares or less than 0.1% of the company. Jay Zammit serves as a director of the company.

Insider buying by calendar month

Here is a table of Cathedral Energy Services' insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
April 2013473,4380
March 2013724,1130
February 201300
January 201300

There have been 1,197,551 shares purchased and zero shares sold this year.

Financials

The company reported the full-year 2012 financial results on March 6 with the following highlights:

Revenue$203.2 million
Net income$14.8 million
Cash$8.5 million
Debt$47.7 million

Outlook

On a year-over-year basis, 2013 overall industry activity levels are expected to remain relatively flat over 2012. Within the Canadian market, industry experts are projecting the oil price differential to narrow in the second half of 2013, which should lead to more dollars in the hands of producer and this may result in increased funding for drilling and completions programs. So far in 2013, industry activity levels in Canada are at lower levels than the prior year. This is expected as the industry did not experience the overall decline in market activity until after the 2012 spring breakup.

The company continues to see significant opportunities in the U.S. market for both directional drilling and frac flowback services; in particular in the Texas and Oklahoma regions where the company's market share is minimal. In late 2012, Cathedral's U.S. Directional Drilling division opened an operations base in Oklahoma City, Oklahoma and for 2013 the company is expecting to experience an expanding work base from this area. For 2013 Cathedral is planning for increased activity levels from its Texas and Rocky Mountain regions. Despite being in a dry gas market, Cathedral's north east U.S. (Marcellus) area is expected to remain flat from an activity level basis.

Competition

The oil and natural gas service industry in which Cathedral and its operating entities conduct business is highly competitive. Cathedral competes with other more established companies which have greater financial, marketing and other resources and certain of which are large international oil and natural gas service companies which offer a wider array of oil and natural gas services to their clients than does Cathedral.

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. The company has a 6% insider ownership. There are four analyst buy ratings, six neutral ratings and zero sell ratings with an average target price of $5.58. The stock is trading at a P/E ratio of 9.65 and a forward P/E ratio of 6.77. The company has a book value of $3.74 per share and the stock has a dividend yield of 7.80%. The stock could be a good pick at the book value.

3. San Gold Corporation (OTCQX:SGRCF) engages in the exploration, development, and production of gold properties in Canada.

(click to enlarge)

Insider buying by insider (last 30 days)

  • Ian Berzins purchased 105,000 shares on April 16-17, and currently holds 220,500 shares or less than 0.1% of the company. Ian Berzins is President, Chief Executive Officer and Chief Operating Officer of the company.
  • Dale Ginn purchased 20,000 shares on April 16, and currently holds 1,326,140 shares or 0.4% of the company. Dale Ginn is Executive Vice-Chairman.
  • Stephen Harapiak purchased 100,000 shares on April 22, and currently holds 100,000 shares or less than 0.1% of the company. Stephen Harapiak serves as a director of the company.
  • Hugh Wynne purchased 74,000 shares on April 17, and currently holds 7,861,779 shares or 2.3% of the company. Hugh Wynne is the founder of San Gold Resources Corporation (a predecessor to San Gold Corporation) and has over 40 years experience in mining, mining services, and exploration. Hugh Wynne is Director and Executive Chairman.

Insider buying by calendar month

Here is a table of San Gold's insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
April 2013299,0000
March 201300
February 201300
January 201300

The month of April has seen all of the insider buying this year.

Financials

The company reported the full-year 2012 financial results on March 25, with the following highlights:

Revenue$142.1 million
Net loss$13.2 million
Cash$11.6 million
Debt$3.1 million
Gold production86,506 ounces
Total cash costs$855 per ounce

On March 6, San Gold announced closing of a $50 million offering of convertible debentures.

News

San Gold produced 17,354 ounces of gold in the first quarter.

Outlook

The company expects to produce between 75,000 and 90,000 ounces of gold in 2013 with cash costs between $800 and $900.

Competition

San Gold's competitors include Claude Resources (NYSEMKT:CGR) and Goldcorp (NYSE:GG). Here is a table comparing these companies.

CompanySGRCFCGRGG
Market Cap:69.79M54.33M22.44B
Employees:450N/A6,163
Qtrly Rev Growth (yoy):0.030.07-0.05
Revenue:142.1M82.35M5.44B
Gross Margin:0.140.400.57
EBITDA:36.58M24.84M2.88B
Operating Margin:-0.090.110.41
Net Income:-13.2M5.68M1.75B
EPS:-0.040.031.95
P/E:N/A9.9714.16
PEG (5 yr expected):N/AN/A1.00
P/S:0.480.664.27

San Gold is trading at a lower P/S ratio than its competitors.

My analysis

There have been four different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. The company's gold resources are 3.5 million ounces. The company has a tangible book value of $0.69 per share. I have a long position in the stock currently.

Source: 3 Resource Stocks With Recent Intensive Insider Buying