Stocks in the energy sector have been taken out to the woodshed over the last few months as oil prices have fallen substantially. It is tough for investors to catch a falling knife, but it could be prudent to start accumulating small positions in some small operators that have great long term prospects. I especially like energy producers whose management is starting to step and buy new shares in their companies. One such outfit is Bonanza Creek Energy (BCEI).
"Bonanza Creek Energy operates as an independent oil and natural gas company in the United States. It primarily engages in the acquisition, exploration, development, and production of onshore oil and natural gas assets in southern Arkansas of the Mid-Continent region and the Wattenberg field and North Park basins of the Rocky Mountain region" (Business description from Yahoo Finance).
Seven reasons BCEI could provide a Bonanza for investors at just over $15 a share:
- The 9 analysts who cover the stock have a median price target of $24 a share. Both Wunderlich and C.K. Cooper initiated shares as a "buy" over the last month.
- Several insiders have picked up over $300k in new shares over the last two months that were higher than current prices.
- The company is experiencing explosive EPS growth. Bonanza earned 58 cents a share in FY2011, but analysts expect $1.60 a share in FY2012 and $2.62 a share in FY2013.
- Credit Suisse has an "outperform" rating on the shares and predicts the company to earn over $7 a share in FY2014.
- Operating cash flow almost tripled in FY2011 and the balance sheet holds very little debt.
- The first quarter showed a 96% increase in production. Production was solidly tilted to oils and liquids (76% of production as well). The company is forecasting production to double for full year 2012.
- The company has an experienced management team and is a proven operator. In the last five years (FY2007 to FY2011), Bonanza has grown reserves at an annual 52% clip and production by a more impressive 72% average.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BCEI over the next 72 hours.