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Michael Filloon, Split Rock (390 clicks)
Oil & gas, small-cap, research analyst, growth at reasonable price
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Most oil stocks are trading at a significant discount to 52 week highs. Even quality names that have significantly outperformed. The jobs numbers on May 6th helped push the stock market higher. There were several names with a significant turnaround on Friday:

Gulfport Energy Corporation (GPOR)
has been on a tear this year returning 137%. It is up approximately 10% since my overview of this company. Gulfport had earnings that disappointed on May 5th. The reason was an error with respect to its numbers. Initial numbers posted in the media had Gulfport missing quarterly earnings by 3 cents. This was later corrected, as Gulfport had earnings of 50 cents per share, which was what analysts were expecting. Gulfport's earnings continue to impress:

  • Met EPS estimates of 47 cents per share
  • Beat revenue estimates with $46.3 vs. $44.4 million
  • Net Income was $21.2 million compared to $10 million year over year
  • Revenue rose 70%

Analysts have significantly increased Gulfport's estimates. In the past 90 days, Gulfport's estimated EPS has risen from 45 cents to 54 cents for the June 2011 quarter. The September of 2011 quarter estimate increased from 48 cents to 56 cents. 90 days ago 2011 estimated earnings were $1.88. Gulfport is expected to earn $2.18. Gulfport has a 52 week high of 38.09. Rodman and Renshaw upgraded the stock on April 25th to market outperform. The current price of $27.80 seems to be a great opportunity.

Another May 6th leader is Voyager Oil and Gas (VOG). Voyager has seen a significant drop in share price since the recent Street Sweeper articles about Northern Oil and Gas (NOG). Northern also had a good day on Friday and seemed to signal a change in momentum. These companies share non-operator models, and both are in the Bakken. The articles did mention Voyager by name, but much of the article seemed to be a scare tactic for the purpose of making money on a large short position.

Most of the article used colorful language and made statements that speculated on the company's business. Some of the article did have good questions, but didn't have answeres for those questions. I still think NOG is a buy based on analyst's growth estimates. 6 analysts cover Voyager. Growth estimates are 133.3% for next quarter. Full year growth is 163.6%, with 242.9% in 2012. Voyager shares have decrease by more then 50% since its 52 week high. It has some interesting properties in the Bakken and DJ Basin of the Niobrara. Much of its Bakken acreage is in McKenzie and Williams counties. It has a one year forward PE of 14.21. Voyager could have significant upside based on negative sentiment based on little but speculation.

Lucas Energy (LEI) like Voyager is a small company. Lucas has been busy since signing a deal with Marathon as it announced a 15% increase in production from operated wells. On April 21st Lucas announced that it received $96.10/barrel of oil from its Gonzales county leaseholds. Its East Texas properties received $112.28/barrel of oil. On April 27th, Lucas announced a JV with Seidler Oil and Gas to drill 8 Austin Chalk wells in 2011. This coupled with the Marathon deal, shows significant interest in Lucas leaseholds. It is up 31% in the last three months. Lucas is almost 50% off of its 52 week highs and is a good buy for an investor that doesnt mind risk.

Petrohawk Energy (HK) had a couple of good days after beating earnings estimates. Petrohawk's beat was the first in four quarters. It announced the sale of its 50% stake in Kinderhawk. Petrohawk announced an increased oil and liquids production target for 2011. It plans to spend $950 million on the Eagle Ford and $75 million on the Permian. Petrohawk has purchased 325000 net acres in the Permian. Analyst growth estimates are 100% for this quarter and the year. Its expected to grow another 74.4% next year. Momentum has shifted in Petrohawk, as they have increase liquids production. Petrohawk has had downgrades by MKM Partners and Morgan Keegan since the begining of 2011.

Penn West Petroleum (PWE) was up 5.64% on Friday. It beat estimates on the 5th of May. Penn West has increased light oil production by 14% year over year. Its 63% oil to gas ratio is increasing every quarter. It had a three-fold rise in first quarter profit. Penn West had a net income of 63 cents per share. This compares to the analyst estimates of 10 cents per share. Penn West states the increase in net profit was due to an increase in realized prices of oil and natural gas liquids. This was an exceptional quarter. RBC Capital upgraded Penn West to outperform. Penn West offers a 4.4% dividend.

GeoResources (GEOI) was up 6.69% on Friday. This small cap value play started losing momentum in early March. At $25.83, GeoResources is selling at a discount to its 52 week high of $32.94. It seems inexpensive at just 11.48 times forward earnings. I have been bullish this name since I wrote an article in late January. It has leaseholds in both the Bakken and Eagle Ford plays. GeoResources annoucnes earnings on May 9th.

Approach Resources (AREX) has been on a tear. It is up 232.6% over the past year. Approach is down 11.8% over the past three months. This is a good buying opportunity. For a more in depth article check out this article. Approach missed earnings by a significant amount on May 4th. Here are some key points from the first quarter:

  • Total production up 42% year over year
  • Oil and natural gas liquids production up 108%
  • Revenues up 53%

Global Hunter securities upgraded Approach on May 6th, helping this stock to rebound from losses earlier in the week. Even with the miss, Approach has some very interesting properties in the Permian. Approach has done well in increasing liquids production.

Rosetta Resources (ROSE) was up on Friday. This is significant due to its missing earnings. Consensus estimate was an EPS of 29 cents. Rosetta came in at 21 cents. It beat on revenues of $97.1 million versus an estimated $95.62 million. Rosetta has done a very good job of increasing oil and liquified natural gas production. I wrote an article on this in February. It continues to work its Eagle Ford leasehold. Outlook was positive with 90% of expenditures on the Eagle Ford. Rosetta stated it divestitures would be spent on the Eagle Ford and Alberta Basin. RBC Capital Markets initiated Rosetta at outperform on February 14th.

EOG Resources (EOG) had a very good first quarter of 2011. It beat by 14 cents or 25.9%. EOG states this is from higher price realizations in oil. It has seen 8 upward earnings revisions in the past thirty days for the next quarter. 90 days ago analysts estimated EOG would make 75 cent/share next quarter. They now estimate 80 cents. On March 30th Ticonderoga downgraded EOG from buy to neutral. This quarter, EOG is estimated to grow 344.4%. 297.8% growth is estimated for the full year. EOG is a well run company, that is having very good luck in its Bakken and Eagle Ford leaseholds. A more in depth article on EOG can be found here.

Friday's turnaround was bullish oil names. It may be a good time to start initiating positions in the oil space. Companies like Brigham (BEXP) were crushed after earnings creating an opportunity not seen in a long time. MKM Partners upgraded Brigham shortly after the sell off. Hedging protects to the downside, but when oil increases suddenly it can make a good quarter look like a miss. In the case of Brigham, its hedging was a gift.

Disclosure: I am long BEXP, NOG.

Source: Significant Turnaround for 11 Oil Companies