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Michael Fitzsimmons

 
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  • World Point Terminals: Strong Potential On Apex Drop-Downs; Patience Needed For Mobile Terminals
     • Wed, Jan. 21 WPT Comment!

    Summary

    • World Point Terminals just acquired Apex's Greensboro facility adding an estimated $3.2 million to EBITDA in 2015 (~$0.09/unit).
    • WPT also recently acquired two terminals in Mobile, AL that will expand (after cap-ex projects) total storage capacity by 14%.
    • Longer term, highly visible drop-downs from Apex could increase WPT's business by ~50%.
    • However, YTD the partnership has not earned its distribution ($0.79 versus $0.90).
    • Although WPT's units have dropped ~15% from its high, and the 6.1% yield is enticing, I rate it a "wait-and-see".
  • TransMontaigne Partners: Yielding 8% With Exports A Positive Catalyst
     • Sat, Jan. 17 TLP 12 Comments

    Summary

    • TransMontaigne LP's GP was sold by Morgan Stanley to NGL Energy's. As a result, TLP has diversified its revenue base away from MS.
    • The Bostco joint-venture with Kinder Morgan is growing cash flow; a Phase III expansion would be positive catalyst.
    • While distribution growth may not be too impressive over the near term, the current 8% yield is very attractive considering the 10-year note is at 1.8%.
    • TLP has fallen from $45 to $33 and is now very ATTRACTIVE for income oriented investors.
  • Saudi Arabia: Cutting Off The Hand To Save A Finger
    Thu, Jan. 15 COP, CVE, CVX 129 Comments

    Summary

    • Saudi Arabia's insistence on driving oil prices quickly lower is a dangerous game for the global economy.
    • A temper tantrum to maintain global oil market share is raising the odds of systemic faults, including global deflation and a meltdown in the Russian economy.
    • The market share Saudi Arabia is holding onto, at a cost of $250+ million/day, may well shrink in absolute terms due to global economic contraction.
  • Western Digital: A Cash Cow With Management Commitment To Return 50% Of FCF To Shareholders
    Editors' Pick • Sat, Jan. 10 WDC 35 Comments

    Summary

    • WDC is a cash cow that reported FCF of $667 million in Q1 FY15 and a net cash position of over $3.2 billion ($13.33/share).
    • The full integration of the HGST division this year will lead to estimated annual cost savings of ~$500 million.
    • The company could earn $9/share in FY15 for a forward P/E=12 and yields 1.5%.
    • WDC is a BUY with a $130 price target for 2015 and is an excellent long-term core technology holding.
  • Ohio State's Buckeye Partners - 'Texas Hub' Assets Will Ride The Coming Export Wave
     • Thu, Jan. 8 BPL 30 Comments

    Summary

    • Buckeye Partners has fallen from a high of $85 to below $73. It now yields 6.2%.
    • New "Texas Hub" acquisition combined with BORCO sets BPL up very nicely as an export logistics play.
    • Buckeye Partners is now a BUY with a 12-month estimated return of 16% and a brighter future in 2016 and beyond.
  • The #1 Performing MLP Of 2014 Is Still Very Attractive For 2015/2016
     • Dec. 31, 2014 PSXP 14 Comments

    Summary

    • Phillips 66 Partners was the #1 performing MLP in 2014 with a gain of 68%.
    • Considering the excellent management at GP Phillips 66, and the enormous inventory of midstream assets, the future continues to be bright for PSXP.
    • At the present drop-down rate, PSX has an over 10-year inventory of assets; distributions should grow to an estimated $2.25 by 2016.
    • Don't be fooled by the current low yield - PSXP is priced for growth, is still very attractive, and should reach $100 by 2016.
  • Greenbrier: 3-Point Strategic Plan Launched 3 Years Ago Is Bearing Fruit
     • Dec. 30, 2014 GBX 33 Comments

    Summary

    • Greenbrier's strategic plan a success: FY14 revenue was up 25%; gaining market share; gross margins (17.2% in Q4) are expanding.
    • Order growth is robust; company has a near 2-year backlog with over $3.4 billion in FY14 orders.
    • Midpoint of FY15 guidance is for EPS=$4.40; a 15 multiple gets you a $66 stock next year (+28%).
    • In addition, shareholders should see higher dividends and stock buybacks. GBX is a STRONG BUY.
  • Whiting Petroleum: Sold-Off, Unloved, And A Deeply Undervalued Value Play
       • Dec. 27, 2014 WLL 117 Comments

    Summary

    • Whiting has completed the all-stock acquisition of Kodiak Oil & Gas.
    • 2014 year-end proved reserves climbed 29% to 780 million boe, 83% oil.
    • A new slickwater frac completion technique is significantly boosting well productivity.
    • Whiting is severely undervalued (proved reserves @ ~$11/bbl) and offers excellent long-term prospects.
  • Statoil: U.S. Shale Overview And Company Update
    Dec. 23, 2014 STO 16 Comments

    Summary

    • Shares of Statoil are down 24% YTD and 40% from the June highs.
    • Yet the Q3 loss was an impairment driven event. The Euro gas market may be more of a long-term concern.
    • Meantime, US shale operations are showing improving productivity yet equate to ~12% of total production.
    • In the Gulf of Mexico, first-oil was announced from Jack/St. Malo, but overshadowed by lower oil prices.
    • STO is a HOLD for the dividend with little reason to get excited about it in the near term.
  • Approach Resources: Wolfcamp Operator Extremely Approachable For A Buyout
       • Dec. 22, 2014 AREX 11 Comments

    Summary

    • Approach Resources has 138,000 net acres in the liquids rich stacked Wolfcamp play in the Permian Basin.
    • The stock is 75% from its high, is currently trading at a significant discount to NPV10, and is nicely hedged for 2015.
    • Approach's acreage is surrounded by bigger oil companies and is attractive as a takeover target for a number of reasons.
    • Approach could easily fetch $10-12/share in a buyout, the high-end of which is a double. Downside is limited.
  • Bellatrix - Orange Capital's 14.3% Stake A Positive Catalyst
       • Dec. 20, 2014 BXE 35 Comments

    Summary

    • Orange Capital has taken a 14.3% stake in Bellatrix and now controls two seats on the Board of Directors.
    • This year, Bellatrix's excellent production growth has been muted by a 60% increase in common shares outstanding.
    • Add in lower commodity prices, and BXE's stock has been slaughtered, but now represents excellent value.
    • Expect a 15% short-term pop in shares and a mid-term gain of 66%. Longer term Orange Capital will expect much more than a double from the current price.
  • Vermilion Energy: The 5.6% Dividend Is Secure
       • Dec. 18, 2014 VET 11 Comments

    Summary

    • Vermilion Energy's exposure to commodity prices has caused a significant sell-off in the stock price.
    • Considering the dividend payout in Q3 was greater than 100% of FFO, there could be concerns about the safety of the dividend.
    • However, such concerns discount the company's strong hedging program and the impact of the Corrib project.
    • Not only is VET's 5.6% dividend safe, the company is VERY ATTRACTIVE at the current ~$40 price on the NYSE.
  • Bakken Crude Trading At $41.75/Bbl Is Continental Resources' Quandary
    Dec. 15, 2014 CLR 158 Comments

    Summary

    • Realized wellhead prices for Bakken crude were recently trading at a $16 discount (27%) to WTI.
    • The NDIC's latest report showed Bakken November production dropped month-over-month.
    • Lower prices, rail transportation costs, new flaring and stabilization regulations are all negatively affecting Bakken producers.
    • As a result, it appears much of Continental Resources' (unhedged) production is unprofitable at the current price.
    • Should CLR keep growing production, or stop drilling and completions until the price rises?
  • Phillips66: Making All The Right Moves And A Screaming Buy
    Dec. 12, 2014 PSX 96 Comments

    Summary

    • Phillips66's 2015 capital budget continues strong investment in chemicals and midstream operations.
    • CPChem's 220 million pound/year olefins plant expansion project will come online mid-2015.
    • Construction continues on the 100,000 bpd fractionator and 4.4 million bbl/month Freeport LPG Export Terminal.
    • The company reiterated its commitment to the dividend and expects double-digit increases over the next two years.
    • Despite lower commodity prices, or perhaps even because of them, PSX is a strong buy.
  • Impact Of PetroQuest's Big Thunder Bayou Discovery
       • Dec. 10, 2014 PQ 22 Comments

    Summary

    • PetroQuest's Thunder Bayou well hits 200 net feet of high-quality pay - paying off on a $10 million investment.
    • PQ expects to bring the well online in Q2/15 at ~25-30,000 Mcf of gas, plus associated liquids.
    • The discovery will not only provide significant growth in production, reserves, and revenues - but it should enable PQ to refinance its 10% debt load.
    • PetroQuest has been drastically oversold, and is poised to recoup much of the loss in market cap.
  • Enbridge: An Emerging Dividend Growth Superstar, But...
    Dec. 10, 2014 ENB 18 Comments

    Summary

    • Enbridge recently announced a 33% increase in the dividend and a new policy to pay out 75-85% of adjusted EPS.
    • I estimate a 12% CAGR in the dividend from 2015-18.
    • However, ENB is currently trading at a high multiple and relatively low yield of 3.2% in a challenging market. Wait for $40.
  • The Eagle Ford Advantage: Location, Infrastructure, And Low F&D Costs
    Dec. 9, 2014 COP 86 Comments

    Summary

    • Eagle Ford crude was recently selling at a near $13 premium to Bakken crude.
    • The Eagle Ford has geographic and infrastructure advantages, and lower F&D costs, as compared to other shale plays.
    • COP's full-cycle F&D costs in Eagle Ford are $20-25/boe.
    • ConocoPhillips is a leading operator in Eagle Ford, has a well diversified global portfolio, and is yielding over 4%.
  • Saudi Arabia: Do The Math
    Dec. 5, 2014 CLR, COG, COP 638 Comments

    Summary

    • It is costing Saudi Arabia roughly $138 million/day to produce the 600,000 bpd of global oversupply.
    • Saudi Arabia says it wants to defend its 10.5% share of global oil supply - an inflated expectation in my opinion.
    • While Saudi Arabia may well discover the "threshold of pain" with regards to US shale producers, is it worth the cost to do so?
    • In the US, oil drilling and completions costs will come down significantly as new wells are cut back.
    • Low-cost natural gas producers like COG and Peyto will benefit from lower D&C costs.
  • Birchcliff Energy: Lower Costs Boosting This Canadian Gas Producer's Bottom Line
       • Dec. 4, 2014 BIREF 39 Comments

    Summary

    • For Q3, Birchcliff grew production and earnings 39% and 217%, respectively, yoy.
    • Per boe expenses were down across the board, with royalty payments and operating expense both down 10%+.
    • The company is trending closer to peer-group leading Peyto Exploration in terms of cost/boe.
    • Yet the company has a P/E=11 and is significantly undervalued in terms of its growth rates, reserves, and drilling inventory.
    • I reiterate my STRONG BUY and $12 price target on shares of Birchcliff Energy, for a 38% gain.
  • Gran Tierra Energy: On Sale For Half Price
       • Nov. 26, 2014 GTE 27 Comments

    Summary

    • Gran Tierra Energy is an E&P company headquartered in Canada with production and assets primarily in Colombia and Peru.
    • The company has 20,000+ bpd of production, is solidly profitable, has an excellent CFO, $360 million in cash, and no debt.
    • The stock is down 40% from its high of $8+ set back into July. Some of the drop is justified, much of it is not.
    • Gran Tierra offers an excellent risk/reward opportunity with 50%+ upside and limited downside.
  • Highpower Technology: Strong Q4 Will Regain Stock's Upward Trajectory
       • Nov. 22, 2014 HPJ 9 Comments

    Summary

    • HPJ's stock rise was stalled by a mixed Q3 EPS report due to lower ASPs for Ni-MH batteries.
    • Yet the company's rechargeable lithium battery segment saw revenues increase 41%.
    • A number of powerful catalysts, including lower tax rates and higher capacity utilization, will lead to a strong Q4 and a bullish 2015.
    • Investors should take advantage of the recent pull-back to ACCUMULATE shares.
  • Peyto Exploration: Canadian Gas Producer Offers Shelter From The (Oil) Storm
       • Nov. 20, 2014 PEYUF 15 Comments

    Summary

    • Low cost Canadian gas producer delivered an excellent Q3 EPS report: up 114% yoy.
    • Production per share increased 33%; FFO was up 63%/share; monthly dividend increased 10%.
    • Canadian gas storage inventories are significantly below the 5-year minimum - a bullish catalyst moving forward.
    • I reiterate my STRONG BUY rating on PEYUF and raise my 12-month PT to $40.
  • Spectra Energy: Marcellus Footprint Makes This A Compelling Dividend Growth Stock
       • Nov. 18, 2014 SE 15 Comments

    Summary

    • Spectra Energy has a number of very attractive and critical growth project related to expanding its existing Marcellus footprint.
    • YTD financial returns have exceeded expectations with Q3 another strong quarter.
    • As a result, the company boosted its dividend 10.5% and the new payout will come a quarter early.
    • Spectra is a BUY with a 12-month target of $43/share and an excellent long-term dividend growth outlook.
  • Oryx Petroleum: Expect A Break-Out In 2015 On Strength Of Prolific Demir Dagh Wells
       • Nov. 15, 2014 ORXPF 18 Comments

    Summary

    • Oryx averaged 2,500 bpd of oil production for 61 days during Q3. Security concerns largely mitigated.
    • After years of spending on leases, drilling, and facilities with no revenue coming in, Oryx essentially broke even in Q3.
    • Year-end production is set to reach 15,000 bpd, with year-end 2015 estimated at ~40,000 bpd.
    • The company is significantly undervalued with respect to the Demir Dagh field alone, let only the other 3 Hawler discoveries.
    • Progress between the Iraqi and KRG government negotiations is a very positive catalyst moving forward. Oryx remains a compelling risk/reward opportunity.
  • PetroQuest: Weak Q3 Ups The Ante On Thunder Bayou
       • Nov. 13, 2014 PQ 17 Comments

    Summary

    • Q3 earnings were weaker than expected and negatively impacted by 3rd party pipeline issues. Q4 guidance was cut.
    • As a result, the stock is down close to 50% since its high set on July 1.
    • Yet the company is solidly profitable: yoy EPS were up 700%; YTD production up over 15%.
    • All eyes are now on PQ's Thunder Bayou well, which is within 3,000 feet of it TD of ~21,000.
  • ConocoPhillips: Offshore Africa - The New Frontier?
    Editors' Pick • Nov. 11, 2014 COP 29 Comments

    Summary

    • Conoco has a 35% interest in two recent "significant" discoveries in offshore Senegal.
    • Preliminary recovery estimates show COP's net interest in the two discoveries is ~450 million barrels.
    • The company's legacy production in Libya remains a wild card with significant upside earnings potential.
    • COP is off 20% from its 52-week high, yields 4%, and is reasonably valued with a P/E=12.3.
  • Inter Pipeline: A Record Q3 Leads To The Largest Dividend Hike In Company History
       • Nov. 11, 2014 IPPLF 34 Comments

    Summary

    • Inter Pipeline's Q3 throughput volumes reached a record 1.14 million bpd, up 11.3% yoy.
    • FFO were up 14.4% yoy - led by a 48% jump in the oil sands segment.
    • As a result, the company boosted the monthly dividend payout by a record 14%.
    • Inter Pipeline is on the cusp of an estimated 35%+ jump in EBITDA growth in 2015.
    • I reiterate my STRONG BUY on the stock, and my expectation for a 30-35% total return over the next 12 months.
  • The Death Of Oil Is Highly Exaggerated
    Oct. 30, 2014 CLR, COP, CVX 225 Comments

    Summary

    • The media and market pundits are jumping on the "oil bear" bandwagon.
    • Yet worldwide oil demand is growing in spite of a lackluster worldwide economy.
    • A typical tight-oil shale well has a 1-year depletion rate of ~70%.
    • With no leasehold constraints, US independent oil producers can very quickly cut shale oil output by simply drilling fewer wells.
    • As a result, US oil production is now quite elastic and can rapidly respond to lower (or higher) oil prices.
  • Tesoro Logistics, LP: Buy The QEP Deal Dip?
       • Oct. 22, 2014 TLLP 14 Comments

    Summary

    • Tesoro Logistics has announced it will buy QEP Resources' midstream assets for $2.5 billion.
    • The MLP will tap the debt and equity markets to fund the transaction.
    • Current unitholders will get a 45% haircut to achieve sub-30% growth in DCF and adjusted EBITDA.
    • Despite being down 10% this morning, this deal is not a compelling reason to invest in TLLP.
    • Investors might be better served by looking at QEP Resources: QEP has a $4.4 mkt cap and will receive $2.5 billion in cold hard cash.
  • DCP Midstream Partners: Yielding 5.6% And Perfectly Positioned For The Shale Gas Renaissance
       • Oct. 21, 2014 DPM 25 Comments

    Summary

    • The DCP Midstream enterprise is arguably the #1 midstream operator in the US.
    • The associated MLP, DPM Midstream Partners, has a 5.6% yield and is excellently positioned for growth.
    • Despite an anemic Q2 EPS report, the drop-down and organic growth story is firmly in place.
    • I rate DPM VERY ATTRACTIVE for income oriented MLP investors.
  • Birchcliff Energy: Dramatically Oversold And Offering 50% Upside
       • Oct. 20, 2014 BIREF 24 Comments

    Summary

    • Birchcliff Energy has dropped 40% since June on irrational selling of a natural gas stock based on falling oil prices.
    • The company is growing per share production at a 27% clip, yet has a P/E of only 12.
    • First half 2014 EPS came in at $0.44/share - up 400% compared to last year.
    • The company's current estimated EV is trading at a discount to proved reserves NPV-10.
    • This stock could easily return 50% over the next year. Birchcliff is a STRONG BUY.
  • How Libya Sunk The Oil Frackers' Stocks, Plus The Conoco Story
    Editors' Pick • Oct. 15, 2014 COP 133 Comments

    Summary

    • Libya was producing 1.65 million bpd of crude in 2010.
    • During parts of 2013, exports fell by ~1.4 million bpd.
    • Recently, Libyan production jumped by nearly 500,000 bpd from Q2 to Sept./Aug.
    • The rapid step-function changes in Libyan production was the single-biggest reason behind the collapse of oil prices and domestic frackers' stock prices.
    • Meantime, ConocoPhillips looks very attractive after a $20 drop in the stock.