The Europeans did not come through for us Thursday, and now it is time for the U.S. Fed to act in coming meetings. The sooner the better, as that creates less of an impact on the U.S. elections and would allow the Fed to at least appear neutral and independent -- which it is always inclined to do. We are getting results from many of our oil and gas E&P plays, and that was kicked off last night. Conference calls will start for us, and we look forward to providing you the meat of the calls as well as our take on them in the coming days.
Oil and Natural Gas
Kodiak Oil & Gas (KOG) was hit hard yesterday after the European news, with shares tumbling $0.60 (7.35%) to close at $7.56/share on volume that reached 15 million shares. The stock closed near the lows for the day, but in after-hours trading the shares were back up to $8.05/share after the company announced its quarterly results. Once again, it missed estimates on the top line, but it did manage to meet on the bottom line. Production is everything here, and these numbers mean little moving forward, but it is important to see how management executes. We think that it will get better at meeting these numbers going forward as management shifts its mentality from being explorers to producers, and focuses on actually managing the assets rather than creating them.
Much like Kodiak, SandRidge Energy (SD) saw its shares fall in regular trading and close near the lows for the day. The shares also barely reacted in the after-hours market to the company's beat on both the top- and bottom-line numbers, on top of the announcement that it was raising its output guidance for the full year. The earnings call will be important, and we figure that the company will have had additional success in Oklahoma. But we are quite interested to see how Kansas is panning out, and if it is what the company thinks it is, then we should see shares move higher. Maybe not today or tomorrow, but the trend will be up as the company unlocks the value of the asset via the drill bit, financial markets, or real estate market. This is still one of our favorite plays in the industry. Shares closed yesterday at $6.58 after falling $0.27 (3.94%) during the regular trading session.
All of this brings us to Chesapeake Energy (CHK), which will report on Monday. We think the news will be good and it will announce that it's close to a deal to sell at least one key asset in the next quarter, which should give shares a boost. We also expect to see solid exploration results as they pertain to the Utica shale as well as the further development of the Eagle Ford. This release and subsequent conference call will impact many Utica players, as the company should have additional details to release on the oily part of the play, and investors will be quite interested in how that is turning out. It is our estimate that we will hear of wells needing to sit for about 90 days in order to produce around 800-900 barrels a day for those wells in the oil window.
Refiners
Tesoro (TSO), an independent refiner, saw its shares increase $3.98 (14.31%) to close at $31.79, with investors trading 12.9 million shares during the trading session yesterday. Investors were cheering a solid beat on the EPS numbers as the company focused on its margins and cutting costs this past quarter. It goes along with what almost all other companies are doing at this point, and that is to watch the bottom line and do everything to squeeze out all the inefficiencies. In this business, though, that means far more as margins are key to success (more so than in other businesses we have found over the years).
Solar
We hate solar. That has been our stance for some time, even when solar stocks were the darlings of Wall Street with sky-high prices and tons of momentum. There are a myriad of reasons, but it all boils down to the fact that almost any other energy source is more productive and economical than solar right now. And it is difficult to see the technology catching up to the actual resources we currently use anytime soon. Regardless, First Solar (FSLR) did prove the skeptics wrong and rose $3.13 (21.15%) yesterday to close at $17.93 on volume of 28.2 million shares. Investors cheered as the company solidly beat analysts' expectations and said that its margins were actually moving higher, despite the tough competition from overseas. That margin news is what we found most impressive, and really goes against the trend in the industry. It will be interesting to see how that plays out in future quarters.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
