2 Attractive Energy Plays That Have Upgraded Production Guidance

 |  Includes: CRZO, MPO
by: Bret Jensen

I decided to take profits of some of my position in fast growing Bakken producer Triangle Petroleum (NYSEMKT:TPLM) at $9 today. Stock is up over 65% since I profiled it in June and no one went broke taking some profits. I am looking to score similar gains eventually on two additional fast growing small cap E & P concerns. Both of which have recently upgraded their production guidance and are selling at attractive levels.

Midstates Petroleum Company (NYSE:MPO) is a small ~$400mm market capitalization company with oil & gas properties in the Mississippi Lime, Anadarko and Upper Gulf Coast shale regions. The company just announced it is producing some 30,000 BOE/D (Barrels of Equivalent/Day) from its properties. This is up considerably from ~ 19,600 BOE/D it was producing during the second quarter of last year.

At just $5.50 a share, the stock is significantly below the $9 median price target held by the 12 analysts that cover the stock. Northland Securities initiated the shares as an "Outperform" two weeks ago. In addition, insiders have been net buyers of the shares over the last six months. Revenues are on track to more than double this fiscal year and analysts' project sales will increase better than 40% in FY2014. Stock is too cheap as less than book value and 3x operating cash flow.

Carrizo Oil & Gas (NASDAQ:CRZO) is a small ($1.4B market capitalization) E&P concern with productive acreage in the Utica, Marcellus, Barnett, Niobara and Eagle Ford shale regions. Its main focus in growing production is currently in the Eagle Ford formation in Texas. The company raised its production guidance a little less than three months ago. It went to 10,800-11,200 BOE/D from 9,600-10,000 BOE/D previously. The company also stated BOE/D would grow 40% in 2013 from its previous guidance of 28%. Carrizo also announced last week it would sell some non-core assets mostly in the Barnett shale for $268mm. This will help accelerate production in its fast growing Eagle Ford producing acreage.

Consensus earnings estimates for both FY2013 & FY2014 have gone up some 20% over the past three months. This made prove conservative as the company has crushed earnings expectations each of the last four quarters. The average beat over consensus has averaged 25% over that time frame. Revenues are tracking to better than a 30% gain this year and analysts expect another 20% increase in FY2014. Given this growth, CRZO is too cheap at less than 11x forward earnings; a discount to its five year average (13.7).

Disclosure: I am long MPO, TPLM. 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.