Despite the poor performance of the energy sector in March, I continue to see a lot of value in fast growing concerns in this space. Not only do I like the valuations in this area but also the possibility of increased M&A that could take out some of my smaller picks or of some of their assets at solid premiums. KKR's acquisition of some of WPX's shale assets Monday is just the latest move in this arena. One small independent energy concern I have liked since the first of the year is Gran Tierra Energy (GTE).
Gran Tierra Energy - "Gran Tierra Energy Inc., an independent energy company, engages in the acquisition, exploration, development, and production of oil and gas properties in Colombia, Argentina, Peru, and Brazil". (Business description from Yahoo Finance)
6 reasons Gran Tierra Energy has additional upside at just over $6 a share:
- Analysts have Gran Tierra increasing revenues by over 20% for both FY2012 and FY2013.
- The company has solid earnings growth slated ahead of it. GTE made $.45 a share in FY2011, and analysts project it will earn $.62 in FY2012 and 80 cents a share in FY2013.
- The stock is selling for just under 8 times forward earnings (a 45% discount to its five year historical average) and has a five year projected PEG of around 1 (1.02).
- It has a very solid balance sheet (over $350mm in net cash) and more than doubled its operating cash flow from FY2009 to FY2011.
- The consensus price target for the 13 analysts that cover the stock is $8.75 a share, which is approximately 40% above the current stock price.
- Consensus earnings estimates have gone up for FY2012 and FY2013 over past three months, a director just picked up $100K in new shares and it is making progress on many of its drill sites.