Interview With Pengrowth Energy

Here's the latest of my interviews from San Francisco. I talk to Wassem Khalil from Pengrowth Energy.

They have a new project starting up, and other good news.

Interview with Spyglass Resources

While I was in San Francisco in early December, I sat down for an interview with Spyglass Resources (symbol SGLRF on the OTC, SGL on the TSX).  I'd heard this company's story and was really interested in finding out more.  Click through, and I think you'll find it interesting, too. His comments on pricing of Canadian oil alone is worth your time.



So the team that built Provident Energy Trust is now running this new company, which has long-term assets and pays a high dividend. It's very new, so be aware of that. Dividend investors often look for a long history of dividend payments; Spyglass doesn't have one because it's so new.

Do your own due diligence before buying anything. This interview is not an immediate endorsement. If you like this interview, stay tuned, because I have a lot more coming with a bunch of different companies.

If you want to see the first interview in this series, Vermilion Energy, click HERE.
IF you want to see the second interview in this series, Couer Mining, click HERE.

Vermilion Energy Interview

In early December, I attended the 49 North Resource Investment Conference in San Francisco. It was a chance for me to speak to CEOs and representatives of a whole bunch of mining and energy companies without having to fight my way through the crowd. In fact, I did a lot of one-on-one interviews.

I've had some discussions with the folks at the office about how to release these videos.  There is a prevailing opinion that videos should only accompany recommendations.

My view: I think the more information I can put in front of people, the better off they are. Investors can make up their own minds. I may choose from some of these stocks for future recommendations. But the fact that I post an interview IS NOT an immediate recommendation. So ...

• Watch the videos.
• Decide for yourself if you want to know more about the companies.

As I said, I'll be covering some of these companies in my premium publication, Gold & Resource Trader. Some of them may also end up in my new monthly newsletter, Oxford Resource Explorer. But the timing of those trades I will save for my paying subscribers.  

Remember, if you're doing this on your own, do your own due diligence.  And before you buy anything, have an idea of at what price you're going to sell it.

Video #1: Vermilion Energy (Symbol VET on the NYSE)

If you like this video, stay tuned for more. I'll be posting more videos all week. I think it's a great way to start off 2014.

Watch My Money Show Presentation on Your Best Bet in Energy

Did you miss my eMoneyShow presentation on energy?  You can watch it now, by CLICKING HERE.

Friday Pick: Enbridge Energy Partners

Here is my trade for today. We'll use the chart price as the entry point.

I said I wanted to add more energy. Enbridge Energy Partners fits the bill.

(Updated chart)

Fundamentals: Enbridge is an oil and gas pipeline companies. It has a market cap of $9.55 billion, 314 million shares outstanding, and plenty of volume at an average 673.3K per day. It also sports a nice dividend yield of 7.15%. The fact that bond yields are falling makes hefty dividend-payers like Enbridge much more attractive. I believe this will help power EEP higher.

A bottom in oil prices may also help, even though as a pipeline company. Enbridge operates a "toll road" on North America's rising oil production. 

Zachs slapped a "strong sell' on this stock on October 13. Interestingly, Enbrdige has only gone higher since then. Zachs mentioned the negative earnings surprise, rising inventories, fines associated with with 2010 Michigan oil spill, and a dwindling cash balance. These are all true, and would give more cautious investors pause.

So if you prefer, other MLPs worth looking at include Energy Tranfer Partners (ETP, Magellan Midstream Partners (MMP) and Kinder Morgan (KMP)

I partly chose Enbridge because I believe the bad news is priced in. The company still has cash ($27.3 million). It is raising cash. Importantly, it is spending money wisely, building new pipelines to get crude out of Canada to ports and to US markets. the company carries a lot of debt, but that's what pipeline companies do. Earnings per share is expected to rise next year.

The company will webcast to discuss third-quarter results on October 30.

My target on a breakout is the July high of $32.90. But if we get another breakout there, then I'm setting my sights on $48. The trailing, close-only stop goes at $29.00.

Crude oil seems to be bouncing from the bottom of its range, but it has stronger support further down, and we may visit that. That means there could be extra volatility in energy stocks, and anyone who doesn't have the stomach for it should stay out.

I am not your investment adviser. Do your own due diligence before buying anything. And if you are inclined toward EEP, now you have all weekend to do your own due diligence.

I wanted to add at least one bank and maybe a social media pick, but that will have to wait until Monday. Have a great weekend.

Oil Prices Trend Lower. But This Energy Fund Is A Winner (3 Charts) ...

I'm choosing today's energy winner for a few reasons, which I'll explain in a minute. 

First, the pick o' the day. The SPDR S&P Oil & Gas Equipment & Services ETF (XES) ...

(Updated chart)

As you can see, the XES is breaking out of its recent range. You could buy it with a stop at either the recent bottom of the range ($41.50) Or below the 50-day moving average OR below the recent uptrend if you have a stomach for risk and  big ol' brass ones.

Why I chose XES ...

1. Obviously, it's breaking out. My target is $62.

2. It's indicative of what's going on in the industry. Increasing oil demand is driving oilfield service activity. 

Source

3. It's an example of how select energy stocks and funds can do well even when oil prices go lower

(Updated chart)

In the short term, oil prices look to get weaker.  Sure, the bigger trend is up. If we get a test of support around $99, that's probably a great buying opportunity.

So why do energy stocks go up when oil goes down? While the price of oil is becoming more and more a reflection of global demand, there are still blockages getting oil out of Cushing, and prices could remain under pressure for a bit as American oil production continues to crank higher. Meanwhile, plenty of companies are VERY comfortable with oil in the $100+ range, and they want to pump more oil. So, the oilfield services companies are doing booming business.

Finally, oil services companies are being helped by the breakout in natural gas prices, which I talked about on Wednesday. We've seen follow-through as nat-gas moves to multi-month highs. This is sparking new interest in drilling for nat-gas and associated liquids.

I've seen multiple stories that the government shutdown is going to negatively impact the oil industry. So far, the action in oil industry stocks is calling those reports wrong. We'll see how it goes, though.

And remember, there are plenty of companies that do better when oil prices go lower.  Airlines (Spirit, US Airways, Delta), for one. Travel companies (Allegiant Travel) for another. Companies that use oil as an input -- for example, agricultural chemical companies like American Vanguard. 

Those are just some ideas.  In any case, these three charts show that while oil prices may be headed lower, select oil industry stocks and funds should head higher. 

I'm not your investment advisor. Do your own due diligence before buying anything.  And a smart investor would have a stop in mind -- and a profit target -- before buying anything.

3 Smokin' Hot Energy Charts & More

I want to show you charts of three energy stocks, then I have a special surprise. Let's start with Devon Energy ...

(Updated chart)

Check out how Devon fell below its trend line in September.  It hugged it, and looked like it would break down. Nope.  Now, it's trying to get back above that trendline. If it does, a breakout that has been building up all year could be next. If it breaks out, the target is $79.

Devon trades near book value and 10.7 x forward p/e. EPS this year got hammered, which actually makes forward comparisons easier.  EPS next year is expected to rise 28.75%, if things go as expected.

(Updated chart)

Higher energy prices means more business for Parker Drilling. Parker trades near book value, 8.92x forward earnings and at just 0.97 times sales.  EPS this year is up 172.1%, and EPS next year should be up 66.15% (that's a guess, remember). Target on a breakout: $10.75

(Updated chart)

Along with breaking out of an obvious inverse-head-and-shoulders pattern, PetroChina is really cheap.  It trades at 8.78X forward earnings, 0.57X sales, and sports a PEG of 0.96.  Not a lot of earnings growth is expected -- 9.68% next year -- but it sports a 4.11% dividend yield, so you're paid to wait. Target: $148.50

Now, for the special surprise. If you've been reading the financial press, many analysts have been bearish on India.  But that just doesn't line up with this chart of the WisdomTree India Earnings ...

(Updated chart)

I could have used the iShares MSCI India Fund (INDA), but INDA has a lot less volume.  Anyway, the point is that India's market is not acting like the economy there is falling apart. It's acting like things are improving rapidly. It's true that India's trade deficit is improving, so that's good news (unless you're a gold merchant -- the main reason is because the government is stomping on gold imports). The breakout from the neckline of the inverse head-and-shoulders pattern gives us a target of $19.50. 

One last chart -- this is an update of the CEW, which I originally showed you on September 3rd, when I called it "One of the Easier Bullish Bets in a Pricey Market."

(Updated chart)

So, it's up 5% since I recommended it.  Not a huge gain, but considering how the broad markets acted during that time frame, I'll take it. CEW could go higher, but watch that overhead resistance, eh? Take profits, don't be greedy.

By the way, I could show you a bullish gold miner or two, but really, you have to start thinking beyond the miners.  When gold is down $10 on the day when the markets are ralllying big-time, the easiest path for gold in the short-term is lower.

The good news is that should bring us to a great buying opportunity. You know how people like gold for presents?  This year, it can be gold miners at a huge discount.

Anything I put here is for my own entertainment. I am not your investment advisor.  Do your own due diligence before buying anything, and beware of those "face-ripper" reversals of both markets and fortune.

Oil & Gas -- The Next Bakken?

On September 24, a friend forwarded an article to me, an article written by John Mauldin, but it was really a promotion for Casey Research.

And here's where some of you roll your eyes and say, "Oh, here we go." 

 Shaddup!  And don't paint with too broad a brush. Casey's Jeff Clark is always a good read, for example. I value his opinion. 

Some of the other Casey guys, well ...

Anyway, this article was titled: "A way to participate in the NEXT Bakken?" And a snippet of it reads ...

 " ... entrepreneurs armed with breakthrough drilling technologies solved the geological puzzle of the Bakken's "tight rock," and in so doing unlocked billions of barrels of oil.
As you can imagine, in the process a lot of folks have made a lot of money. Which brings me to my reason for writing.
The energy team working for my friends at Casey Research firmly believe they have identified a relatively unknown company sitting on top of what could be the "Next Bakken"-a massive oil formation with every bit as much potential as the original."

There's more, but you get the gist.

Since I write about energy and the Bakken, my friend wanted my opinion. 

Here's what I wrote to her ...

I can't know for sure, but dollars will get you chocolate-glazed donuts that Mr. Maudlin is talking about the Illinois Basin. Why? Because it's the only American oil basis without a horizontal oil play (yet). And it sits smack dab over the New Albany Shale. It looks very similar to the Bakken, and it’s almost in the middle of the country.

Here's a nice chart showing the Illinois Basin's extent.

But what company would Mr. Maudlin and the Casey Research Team be talking about, eh? 

If your targets are micro-caps, the obvious choice would be Strata-X (SXE on the TSX-V). It has a market cap of $60 million -- very small, but do-able. And it has 123.9 million shares outstanding. Insiders own 22% of the company (usually the more insider ownership the better for these small companies, because the stock is in "strong hands"). Company chairman Ron Prefontaine has a track record of success -- he sold his last two companies for a combined $4 billion.

The unfortunate thing is that it's already getting some buzz disproportionate to its small size. That makes its chart look like this ...(updated chart)

Holy stock-spike, Batman, look at that chart in the last week! Why, it's almost as if someone been buying the stock in advance of Mr. Mauldin's article. 

Whaaaaaa?

OR, it could be the fact that Strata has 48,000 acres in the Illinois Basin. They paid 1/5 the price that acreage is going for now.
Strata is drilling their first well in Illinois right now.  Speculators expect them to hit paydirt. "And then," the sharp-eyed folks will tell you, confidentially, "this stock could easily double!" Except it already doubled. Damn ... damn, damn, damn.

But wait a minute.  Strata could more than double, if Rex Energy is a guide.

Who?

Rex Energy is the OTHER company working in the Illinois Basin.  It only has 33,000 acres compared to Strata's 48,000. BUT it has a market cap of $1.2 billion, only 52.56 million shares outstanding, and its earnings should climb 80% over the next year.  Oh, and the company just drilled its first horizontal well in the Illinois. That well, owned by Rex Energy has an IP30 (the first 30 days' initial production) of 222 barrels of oil per day. That well produced a peak IP of 367 bpd. The day that news came out, Rexx's stock jumped over $1 a share.

Oh, and Rex is listed on the Nasdaq, so it's much easier to buy.
(updated chart)

Yeah, the trend in Rex is pretty obvious.

Rex is very busy in the Utica shale, and other plays in the Northeast,including "super-rich" Marcellus and Devonian plays. Rex has grown its reserve base to over 100 MMboe and its liquids portfolio makes up 40% of that. Rex is considered a liquids producer, not a gas producer. In Q2, it produced a record production of oil and natural gas liquids (NGLs).

All this helped Rex beat earnings estimates (by a penny) in the most recent quarter. 
There are other Illinois Basin plays. But I'd avoid the OTC stocks that no one should waste their time with. Ha, look at me say that and they will turn out to be winners. 

Personally, I think Rex Energy is the one I would go with.  I also like Gastar (GST). I would buy either one on a pullback.

These are not official recommendations.  I'm not your investment advisor. You are in charge of your own investing destiny.

UPDATE:  Tommy alerts me that the stock Mauldin was talking about was PRD Energy (PRD on the TSX-V), which ... well, you might want to think hard before you buy it at present prices.  I still like REXX.