Encore, Berry, Cimarex Well-Positioned to Surge

Small cap independent oil and gas producers well-positioned to gain in an environment of low confidence in political leadership include buy recommendations Encore Acquisition (EAC), Berry Petroleum (BRY) and Cimarex Energy (XEC). As energy prices moved to politically unwelcome, but more realistic levels considering long-term supply and demand, our government counteracted with a hastily-conceived subsidy to turn scarce food into energy. Fortunately, economics is trumping politics with the market creating the best energy policy --- higher price for refined oil products and natural gas, the most abundant clean fuels.

With no political action between now and the election in the fall, stock prices may have the chance to catch up with oil price. At McDep Ratios from 0.75 to 1.01, the three stocks are priced for oil at $75 to $100 a barrel when futures prices for the next six years currently average $135. Encore is studying strategic alternatives that could include the sale of the company. Berry is completing a natural gas acquisition that extends its geographic spread from California and the Rockies to Texas. Finally, Cimarex concentrates on horizontal drilling to tap deposits in Texas and New Mexico as well as in the newly developing Woodford Shale in Oklahoma.

Originally published on June 24, 2008.

EAC vs. XEC vs. BRY 1-yr chart:

Comments

[Ex OCC andOTS]

How about ENP? Management has a stated goal of doubling distributions over the next 5 years.