Today we are going to go heavy on the oil and natural gas plays as we have lots of earnings out over the next few days from many of our favorite players. We also have the delayed crude inventory numbers due out today. Looking forward we would expect to see a rise in this number due to Sandy in the coming weeks but we doubt that the storm would have had much of an impact on current data. That will be something to watch in the weeks ahead though.
Oil & Natural Gas
Talisman (TLM) reported earnings and in yesterday's trading saw shares finish lower by $0.76 (6.25%) to close at $11.40/share on high volume of 17.4 million. Shares had been down a bit more after news that the company would not use proceeds from the recent sale of North Sea assets to buy back shares hit investors and the realization that those funds would instead be used to pay down debt and effectively deleverage the company. Further adding to the negativity is that the company is pairing back its capital expenditures by about 25% to a level where at least some analysts are speculating that production might actually fall. We said it yesterday on Twitter, but this is one of the most frustrating stocks we ever owned and it was actually one of our biggest winners ever with a multi-bagger return (probably the biggest winner if you factor in the company it bought that we owned too). The company has some great assets, and even admits that there are some underutilized ones on the books at this time, so hopefully investors can watch as the company does a better job of developing them in the near future. Keep in mind that a rebound in the price of natural gas would be a big help for Talisman as they are big in shale gas, having been late to that game.
Gulfport Energy (GPOR) reported some more great drill results and the shares rose accordingly. We are trending back towards 52-week highs now, and although the shares are trading above the $33/share level we are not sellers here. The company is in a sweet spot in the Utica and is cranking out what we like to call 1k+ wells there. Any time you can post results like that there is reason to celebrate and it appears at this time that the results should continue. We do not expect the company to need any more capital at this time, as they now have various avenues to raise cash without watering down current shareholders and should they need cash we would expect them to utilize debt instruments.
We will see earnings on November 8th for SandRidge Energy (SD) and we think that the company will surprise investors with a few monster wells and production which is above expectations. The company should be able to provide some further color on their exploration land they locked up earlier this year, even if they do not want to go into too much detail. If they can prove that the play extends out to those holdings as well, we would expect a revaluation of the company's assets and some investor excitement. We also expect to hear some news on in the next two days updating investors on potential joint ventures from other companies, namely Chesapeake Energy (CHK) who reports their earnings today and holds a conference call tomorrow, in the play who have their assets on the market right now. At current prices we think this is a good entry point for long-term holders who can see past the nonsense that the analysts cannot (we are referring to their worries about short-term implications of the company's capital expenditure program).
Kodiak Oil & Gas (KOG) reports earnings today, but we would warn investors to be careful because the company already reported their production numbers which gives you less of a bang for your buck when betting on this one. Those numbers are what has kept the stock so strong lately and probably what will lead one of the big boys to eventually buy the company out. Do not play it for the buyout, but rather the continued exploration success and the infrastructure build-out in the Bakken which is allowing for better pricing, lower transportation costs and higher production. Those are the three key points to pay attention to.
Disclosure: I am long GPOR.