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In a previous article, we discussed how the Argent Energy (OTC:ANGYF) is one of the cheapest ways to buy U.S. oil. Although Argent is a Canadian company, its producing assets are entirely located in the United States.

Dumping by several large holders has driven the company to absurdly low valuations:

Price/NAV (Risked)59%
EV/BOED68,465
Dividend Yield14.2%
EV/BOE Reserves$13.98
RLI28

The collapse in Canadian crude oil prices has hammered companies like Penn West (PWE) and Pengrowth (PGH). Despite the fact that Argent sells its U.S.-based oil for $20-$30/BOE more than these companies and it has much better hedging, it has followed them down.

When we account for Argent's higher netbacks, we can see it's a bargain even among beaten-down Canadian E&P companies. Using a valuation measure that we describe here, Argent handily beats these companies.

Company(EV/BOEPD)/Netback
Argent1,537
Penn West1,724
Talisman (TLM)1,780
Enerplus (ERF)1,826
Pengrowth2,215
Crescent Point (CSCTF)2,331

Insiders Back up the Truck

In the earlier article, we noted how Argent insiders have been buying lots of stock with their own cash. This buying has accelerated, with a flurry of purchases just last week.

DateInsider NameSharesPrice
11/15/2013Bovingdon, Sean921$7.87
11/14/2013Bovingdon, Sean200$7.95
11/14/2013Bovingdon, Sean1300$7.97
11/14/2013Bovingdon, Sean200$7.96
11/14/2013Bovingdon, Sean400$7.94
11/14/2013Prokop, Brian900$7.93
11/14/2013Prokop, Brian12000$7.91
11/14/2013Prokop, Brian1200$7.95
11/14/2013Prokop, Brian3860$7.93
11/14/2013Kathryn Nunn14570$7.95

The Selling Pattern

A quick look at the charts underscores how Argent has been dumped. Before October 10, average volume hovered around 100,000 shares. Since then, it has averaged over 400,000 shares.

(click to enlarge)

CEO Brian Prokop described this to me as "institutional selling and selling on unfounded negative rumors." Much of the selling did indeed come from several large holders. For example, Sentry Investment Management, which held two million shares earlier this year, appears to be liquidating. Short interest has also climbed from 11,000 to 487,000 in the last two months.

A Beat On Q3 Earnings

Since our earlier article, Argent reported Q3 earnings. Production was previously reported so there were no surprises there. However, the $16.1 million cash flow beat expectations by 15%. Production jumped from 4900 BOEPD in Q2 to an average of 5400 BOEPD. Better yet, their current production now stands at 7200 BOEPD.

Better Hedged

We are not optimistic about oil prices (either Edmonton Light or WTI) in the near future. So it's worth noting that Argent implements hedging practices that are more like U.S. upstream MLPs than those of its Canadian peers. It hedges roughly 70% of its forecast production going forward 12 months, 60% 24 months forward; and 50% 36 months forward.

This hedging will enable Argent to maintain its dividend even with weak oil prices. The company has announced that it intends to maintain its distribution throughout 2014.

Summary

As the company noted in a press release today, there are no material events or circumstances beyond what it has disclosed. The company has boosted production and has no plans to reduce its distribution. The current market activity does not reflect fundamentals.

Insiders are clearly voting with their own money, buying loads of stock over the last few weeks. Four out of the five analysts that cover the stock rate it a "Buy," with an average price target of $10.75 -- implying a total return of 57% over the next year.

Source: Argent Energy: Dumping Continues While Insiders Buy At Bargain Prices

Additional disclosure: I am also long AET.UN on the Canadian TSX exchange.