2 Basic Materials Stocks With Recent Intensive Insider Buying

|
 |  Includes: COLUF, ZPTAF
by: Markus Aarnio

The basic materials sector has been the worst-performing group year to date with a loss of 2.5%.

Click to enlarge

In this article, I will feature two basic materials companies 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. Surge Energy (OTCPK:ZPTAF), an oil and gas company, explores for, develops, produces, and markets petroleum and natural gas reserves primarily in Western Canada and the Northern United States.

Click to enlarge

Insider buying by insider (last 30 days)

  • Murray Bye purchased 3,333 shares on June 11 pursuant to a private placement. Murray Bye currently holds 48,884 shares or less than 0.1% of the company. Murray Bye is Vice President Production.
  • Paul Colborne purchased 652,252 shares on June 11 pursuant to a private placement. Paul Colborne currently holds 1,132,052 shares or 1.0% of the company. Paul Colborne is President & Chief Executive Officer of the company.
  • Margaret Elekes purchased 3,015 shares on June 11 pursuant to a private placement. Margaret Elekes currently holds 79,143 shares or less than 0.1% of the company. Margaret Elekes is Vice President Land.
  • Maxwell Lof purchased 6,800 shares on June 11 pursuant to a private placement. Maxwell Lof currently holds 186,698 shares or 0.2% of the company. Maxwell Lof is Chief Financial Officer of the company.
  • Dan O'Neil purchased 5,000 shares on June 11 pursuant to a private placement. Dan O'Neil currently holds 163,323 shares or 0.1% of the company. Dan O'Neil serves as a director of the company.
  • Tee Ong purchased 6,667 shares on June 11 pursuant to a private placement. Tee Ong currently holds 24,425 shares or less than 0.1% of the company. Tee Ong is Vice President Engineering.
  • Murray Smith purchased 1,000 shares on June 11 pursuant to a private placement. Murray Smith currently holds 23,727 shares or less than 0.1% of the company. Murray Smith serves as a director of the company.

Insider buying by calendar month

Here is a table of Surge Energy's insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
June 2013 678,067 0
May 2013 0 0
April 2013 0 0
March 2013 8,850 0
February 2013 0 0
January 2013 310,500 0
Click to enlarge

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

Financials

The company reported the first-quarter financial results on May 10 with the following highlights:

Revenue $53.6 million
Funds from operations [FFO] $25.2 million
Net loss $1.4 million
Net debt $234.8 million
Oil production 9,636 boe/d
Click to enlarge

News

On June 11 Surge Energy announced an accretive acquisition of an elite, operated, medium gravity crude oil producing asset in the southwest area of Saskatchewan for $240 million.

Competition

The oil and natural gas industry is competitive in all its phases. Surge Energy competes with numerous other participants in the search for, and the acquisition of, oil and natural gas properties and in the marketing of oil and natural gas. Surge Energy's competitors include resource companies which have greater financial resources, staff and facilities than those of Surge Energy. Competitive factors in the distribution and marketing of oil and natural gas include price and methods and reliability of delivery. Surge Energy believes that its competitive position is equivalent to that of other oil and gas issuers of similar size and at a similar stage of development.

My analysis

There have been seven different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. The company has a book value of $5.04 per share. I believe the stock could be a good pick at the book value. At year-end 2012, Surge's independent engineering report provided an estimate net asset value of $8.21 per basic share, before tax, based on proved plus probable reserves [PV10].

2. Colossus Minerals (OTC:COLUF), a development stage mining and exploration company, engages in the acquisition and exploration of mineral properties. The company primarily holds a 75% interest in the Serra Pelada Mine, a gold-platinum-palladium project, which covers an area of approximately 100 hectares and is located in Pará, Brazil.

Click to enlarge

Insider buying by insider (last 30 days)

  • Alberto Arias purchased 7,500,000 shares on June 12 and currently controls 20,723,900 shares or 16.6% of the company. Alberto Arias serves as a director of the company.
  • Alden Greenhouse purchased 8,000 shares on June 12 pursuant to a private placement. Alden Greenhouse currently controls 16,000 shares or less than 0.1% of the company. Alden Greenhouse is Chief Financial Officer of the company.
  • John Turner purchased 10,000 shares on June 12 pursuant to a private placement. John Turner currently controls 28,000 shares or less than 0.1% of the company. John Turner serves as a director of the company.
  • Ann Wilkinson purchased 15,000 shares on June 12 pursuant to a private placement. Ann Wilkinson currently controls 15,000 shares or less than 0.1% of the company. Ann Wilkinson is Vice President Investor Relations.

Insider buying by calendar month

Here is a table of Colossus Minerals' insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
June 2013 7,533,000 0
May 2013 0 0
April 2013 2,138,200 50,000
March 2013 347,900 0
February 2013 12,000 40,600
January 2013 0 0
Click to enlarge

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

Financials

The company reported the first-quarter financial results on May 15 with the following highlights:

Revenue $0
Net loss $0.3 million
Cash $32.1 million
Debt $66.3 million
Click to enlarge

On June 12 the company closed a $28.8 million financing.

Upcoming milestones

Click to enlarge

Competition

The mineral exploration and mining business is competitive in all phases of exploration, development and production. The Colossus Minerals competes with a number of other entities in the search for and the acquisition of productive mineral properties. As a result of this competition, the majority of which is with companies with greater financial resources than Colossus Minerals, Colossus Minerals may be unable to acquire attractive properties in the future on terms it considers acceptable. Colossus Minerals also competes for financing with other resource companies, many of whom have greater financial resources and/or more advanced properties. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favourable to Colossus Minerals.

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 has insider ownership of 12.9%. There are five analyst buy ratings, zero neutral ratings and zero sell ratings with an average target price of $5.74. The company has a book value of $1.14 per share. I believe the stock could be a good pick at the book value.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.