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  • Among energy firms, a disconnect between Q2 results and stock movement [View news story]
    To expand on mjtroll's comments: NFX and XCO are not oilfield service and equipment companies. Both are pure E&P (exploration and production) companies. They are in the same general Energy sector of course, but their sub-industries are completely different. The distinction may be academic for investors and traders as the XOP and OIH are inextricably linked and rarely move independently. However, relative valuations do tend to follow more closely the sub-industry than the sector, just as they follow an independent company more closely than its sub-industry.
    Jul 30, 2014. 03:42 PM | 2 Likes Like |Link to Comment
  • Memorial Resource Development IPO Expiration Provides Hot Buying Opportunity [View article]
    Don - I appreciate you letting us know when these new issues arrive and when the quiet period is set to expire. That can be a solid lead to a great buying opportunity on a conceptual level.

    I recognize this article as being very similar to the one you published a few weeks ago about Parsley Energy (PE). Same concept, same recommendation, same type of company. But that never worked for PE as the underwriters came out with either Hold or Outperform ratings and the stock tumbled 7-8%. Considering that they had every reason to promote that stock, a Hold rating was quite damning, and chased me off the stock for good.

    That probably won't happen here. I agree that MRD has a great chance at being a success. Unlike PE, its management, backers and associated companies are all proven winners.
    Jun 26, 2014. 06:07 PM | 1 Like Like |Link to Comment
  • Quiet Period Expiration For Parsley Energy Offers New Buying Opportunity [View article]
    First five ratings I've seen were either Outperform or Neutral. Not an exciting start for the stock and probably not the push higher that was expected from the underwriters.

    Don, perhaps you know if this is typical of the underwriters. I would've thought they'd come out with a Buy if at all possible, so these underwhelming ratings seem all the more significant considering the political pressure to support a company they've underwritten.

    The ratings I've seen so far: Wells Fargo: Outperform; Goldman Sachs: Neutral;
    JP Morgan: Neutral; Credit Suisse: Outperform; GHS: Neutral; Raymond James: Outperform.

    Since Don's original article was published the stock has fallen from $24.85 to current price of $22.77 (-8%). Compare to JONE, a similar company in that it's relatively new and helmed by a second-generation oilman. JONE, during same period, is up from $24.23 to $25.93 (+7%). JONE has six Buy ratings and two Outperforms.

    I jumped on both a week or so after issuance, but bailed on PE when the ratings started coming out. Unfortunately JONE rose slower than PE fell and I'm still negative on the pair, but I like JONE for the long-haul. Clear merger bait.
    Jun 23, 2014. 11:51 AM | Likes Like |Link to Comment
  • IPO Preview: Memorial Resource Development [View article]
    Massively leveraged to natural gas. Not just income, but all reserves in all categories. I'd love to know their breakeven gas price to drill these horizontals, but I'm betting we're not far from it right now.

    We've all gotten pretty comfortable with $4.50 gas the last six months or so, but oil and gas are such fickle commodities. This company will take iron will to stick with through any kind of gas price decline.

    Remember last year, when we had way too much gas and we were always going to have way too much gas and there was no end in sight and no way for it to get better? Then we had this incredibly great/awful winter and used up more storage than we had in years, and suddenly everyone's excited about nat gas again.

    So the storage will take all summer to refill (but it probably will get filled before it gets cold again) and what else has changed? We're not about to start exporting it, we're at the break-even price on coal switching, more gas is coming to market from all the oil resource plays and new pipelines...etc.

    There are lots of ways to bet on gas. This one reminds me of a 3x leveraged ETF. That doesn't mean it's a bad idea, but it does mean that caution is mandatory. I'd only invest my play money in it.
    Jun 12, 2014. 07:04 PM | Likes Like |Link to Comment
  • Quiet Period Expiration For Parsley Energy Offers New Buying Opportunity [View article]
    Maybe I should know this, but do you mean 20 days after IPO or 20 days after quiet period expires?
    Jun 8, 2014. 04:18 PM | Likes Like |Link to Comment
  • Quiet Period Expiration For Parsley Energy Offers New Buying Opportunity [View article]
    As a 30+ year participant in the financial and operational sides of E&P, I've spent many hours observing and analyzing the difference between the generations. Houston is filled with multi-generational oil and gas guys, and I think I can count on one hand the number of sons or grandsons that have made good over a prolonged period of time. Certainly there are the Jeff Sandefers that got a boost from dad, made a quick pop and got out with some serious cash, but there are so many others I won't name that got the same boost, enjoyed the ride for awhile, but then found out that it was a lot of hard work for a really long time and just couldn't handle it.

    Having said that, I love PE's business plan. Vertical and now horizontal wells into multiple stacked pays in one of the hottest basins in the world - nice! I was all set to dive in until I saw who was running it - and I don't know the young man at all - but a 3rd generation silver-spooner has me on the sidelines. This is patently unfair of me, just as it may be equally unfair to assume that his family DOES give him an edge. We should all be given every opportunity to prove that we're our own man and capable of making it on our own.

    And then I read that he started with 100 wells he got from Grampa. After working as an operations tech for Dad. Just exactly how well would he have done in the world if he hadn't had their help, and how much can they help him now? Guess we'll all find out.
    Jun 6, 2014. 06:01 PM | 2 Likes Like |Link to Comment
  • Mortgage REITs eye sliding interest rates [View news story]
    I think I've about had it with the mREITS. We got killed last year because everyone was afraid interest rates would go up with the tapering. Now we're getting hammered because interest rates are going DOWN. Screw this - I'm buying more blue chip dividend payers and sticking my head in the sand.
    May 28, 2014. 05:12 PM | 1 Like Like |Link to Comment
  • 9.6%-Yielding Memorial Production Partners Enters Enhanced Oil Recovery [View article]
    Any comments about the pros and cons of having a parent providing drop-downs?

    So many private equity firms (like NGP) made bad investments in 2005-2007 before gas prices crashed, and then wound up holding the bag on uneconomic assets. I don't think a single upstream private equity firm escaped without at least a few outright losers in their portfolio. It has been no surprise when these same PE firms form an MLP sub, and then slowly feed their low-end, marginal gas properties down to them.

    Every time I hear that MEMP is making another acquisition I quickly scan the press release to see if they bought it on the open market or if it was a drop-down. I feel much better about the open market deals, even though it does mean they may have beaten out other aggressive purchasers in a usually competitive process.

    So, drop downs - yeah, a nice steady supply, and can be layered in slowly and easily, but consider the source and ask yourself if that's a good thing. Just my thoughts, I'd be interested in yours.
    May 8, 2014. 04:58 PM | Likes Like |Link to Comment
  • Danger Zone: Workday [View article]
    I smell disaster on all these high-tech momentum stocks that are built on concepts and not fundamentals. You don't have to be very old to remember what happened in 2000. Once the market loses its enthusiasm for any sector then basic fundamental financial analysis becomes the only thing that its stock prices are based on. That is a scary thought with these high-concept/no profit darlings.

    I'm out.
    Apr 16, 2014. 02:20 PM | 1 Like Like |Link to Comment
  • Halcon Resources: Will The Tuscaloosa Marine Shale Be The Final Nail In The Coffin? [View article]
    I take a far more simple approach to HK. Look at what Floyd Wilson did at Petrohawk. The company was maligned, downgraded and kicked to the curb for a series of failures but kept searching for the next big thing and wound up being very early to the Eagle Ford. That poor, badly managed company sold to BHP Billiton for $15 Billion and its management and shareholders laughed all the way to the bank. HK's story reminds me exactly of Petrohawk's - stumbles here and there, general disrespect for the company and its management, significant declines, then left in the scrap heap...
    Of course, it remains to be seen if HK can "pull a Petrohawk" and finally find a way to be in the right place at the right time. The way new plays are being developed and new technology is making previously forgotten areas into hot ones, there seems to be a lot of opportunity for the HKs of the world that swing for the fences and have the resources to do it more than a few times.
    I like HK at $3.50. It may go lower, of course, but probably not much, and it may go higher, of course, and when it does, probably by a lot. That's a reasonable risk/reward scenario for any stock, but especially one with a management team that's been down this road before.
    Mar 21, 2014. 01:51 PM | 10 Likes Like |Link to Comment
  • It's Not Easy Being GreenHunter [View article]
    Short but sweet, a fair analysis that hits all the high spots without slogging through the details. I've been in GRH from the beginning, thinking that the business plan was solid and knowing the need for SWD in Appalachia. What I hadn't counted on was what basically comes down to mismanagement of the company's finances. As noted, that issue now clouds out the operational advantages the company has.

    Yet I hold on. As larger players expand into SWD in the region, my hopes are that GRH will be an attractive acquisition candidate. I'm not sure what the premium might be in such a case, but it's not unusual to see 25-50% premiums above current stock prices being paid.

    Can this happen here? I've no idea, and would appreciate any feedback. Without this hope, there's little reason to hold the stock.
    Jan 24, 2014. 12:18 PM | Likes Like |Link to Comment
  • Memorial Production Partners: 9.9% Yield, Good But Expensive [View article]
    Depends on what you consider "long term". As a 35-year employee of the oil patch and a somewhat knowledgeable investor, I spotted MEMP a mile away when NGP announced its plans. I have always had tremendous respect for the management of both companies, and so I jumped on MEMP when it opened almost two years ago. I don't reinvest dividends because I hate the randomness, but I do buy on dips and have built MEMP up to almost 10% of my portfolio. So, for almost two years now I've been raking in the +/- 10% distribution and am up over 20% on stock appreciation. That feels like long-term to me.

    I don't keep a lot of stocks for two years but this one's been special. To be able to make money on gassy assets in this market takes that "laser focus" and they've proved themselves again and again. On top of their ability to make money in this $3.70/MCF world, just imagine the potential if gas ever gets back to the $5-6 that many feel is inevitable.

    There's a lot to like here.
    Sep 21, 2013. 05:49 PM | 1 Like Like |Link to Comment
  • 2 Stocks Set To Profit From Tougher Fracking Laws [View article]
    There's actually another factor that can and should impact the waste-water recycling business even more than state regulations: drought. Especially in Oklahoma (Mississippi Lime) and South Texas (Eagle Ford), there's barely enough water to do all the fracking that's lined up and waiting on the equipment. This situation continues to deteriorate as the drought reaches well into its third year, and there are signs that this water shortage is here to stay. Recycling frac water is certainly environmentally responsible, and that's great, but it just may be the only source of frac water at all. Talk about a business being in the right place at the right time!
    Note: I've been long GRH for a long time. It has been painful but I firmly believe in the basics behind the business plan.
    Jul 29, 2013. 03:15 PM | Likes Like |Link to Comment
  • Promising Times for Green Hunter Energy [View article]
    Anyone have anything new to add on GRH? Making a big move today and not sure the catalyst. I hope it's not a delayed reaction to replacing their CFO, announced a week ago. I've never thought that replacing a CFO was a good sign for a public company.
    Jul 19, 2013. 01:14 PM | Likes Like |Link to Comment
  • Southern Copper (SCCO) is considering closing its foundry and refinery in southern Peru because it doesn't think it can comply with limits on sulfur dioxide emissions that will take effect next year, an internal document says. It's unclear how such a closure would affect SCCO's annual copper output, estimated at 650K metric tons this year. [View news story]
    I take this as nothing more then SCCO letting the Peruvian government know that harsher regulations will hurt business. It's clear from the press release that they've been arguing this with the regulators for some time now and this is the next logical step in the negotiations. Releasing the information via a memo to the staff is a time-honored way to let the world know what could happen if the regulations aren't loosened or delayed.
    Jul 5, 2013. 06:00 PM | 2 Likes Like |Link to Comment