Posts Tagged ‘oil stocks’
The weakness in oil prices was pretty sudden and has changed the financial dynamics for many producers. Typically, weaker oil prices are slow to translate into lower prices at the pumps.
Domestic junior oil stocks have been hot commodities until recently. Many of the market’s best growth stocks in this sector continue to be expensively priced and finding value has been a difficult endeavor.
One company we’ve considered before in these pages is Northern Oil and Gas, Inc. (NOG). (See “My Favorite Bakken Oil Play.”) This outfit is based in Minnesota and operates in North Dakota and Montana. The stock is not expensively priced, and the company is back online with solid sequential growth in production.
Northern has experienced infrastructure problems and weather-related issues that have hampered well completions, but the company’s latest quarter was a big success and full-year 2014 production guidance was upgraded to between 20% and 25% growth over 2013, compared to previous guidance of 15%.
According to Northern, its 2014 second-quarter production grew 17% sequentially and 41% year-over-year to 1.4 million barrels of oil equivalent (boe), averaging 15,369 boe per day.
The company’s total oil and gas sales in the second quarter of 2014 increased dramatically to $121 million, compared to $80.0 million in the second quarter of 2013.
But management incurred a significant loss on the mark-to-market of a derivative instrument and on the settlement of a derivative instrument, which resulted in actual second-quarter revenues being knocked down to $74.6 million, compared to $96.0 million in the second quarter of 2013.
As a result of the derivative loss (perhaps the reason why the … Read More
Crude oil has pulled back from its recent price strength, but it’s still holding up pretty well above the $100.00-per-barrel mark for West Texas Intermediate (WTI).
Energy is still a top sector for equity portfolios, but it is the case that many oil stocks have already moved up tremendously and valuations are a little stretched.
I’m a big believer in energy infrastructure and pipelines for income-seeking investors and junior energy stocks for risk-capital investors.
It’s more difficult to find value in this market; that’s for sure. But domestic oil and gas production, transportation, and storage remain a growth industry.
Halliburton Company (HAL) just reported another great quarter, with its oil and gas services still being pretty robust worldwide.
In particular, Halliburton’s management noted solid strength in the U.S. market for energy services, and that’s on top of several tremendously good years in recent history.
According to the company, 2014 second-quarter sales came in at $8.1 billion, up solidly from first-quarter sales of $7.35 billion and comparative second-quarter sales of $7.32 billion last year.
Recent quarterly revenues were a new record for Halliburton, with notable strength in its North American operations. In fact, domestic operations are so strong that management plans to immediately add new equipment, transportation capabilities, and work crews for hydraulic fracturing.
The company’s operating margins are rising (internationally, as well), and the board just increased its share repurchase authorization by a huge $4.8 billion to $6.0 billion in total.
Halliburton’s share price is up 40% year-to-date, and I’d say there’s a good probability the position is going higher yet, as it’s not overpriced for double-digit growth.
The company’s … Read More
The spot price of oil is holding up and there are countless oil stocks pushing their highs.
If the 1990s were the decade for technology stocks, then the 2010s are the decade for independent oil producers.
While the largest integrated oil and gas companies are struggling to grow production, mid-tier, independent producers are filling the gap, and there are countless growth stories in the marketplace.
EOG Resources, Inc. (EOG) has been a top stock market performer and is likely to continue ticking higher. The company has net proven reserves of some 2,119 million barrels of oil equivalent, of which 94% is located in the United States.
Of the company’s total 2013 production, 88% came from the U.S. and Canada, representing a nine-percent gain over 2012.
First-quarter 2014 earnings were $661 million, compared to $495 million in the first quarter of 2013.
The company’s total crude oil and condensate production rose 42% over the comparable quarter last year, and management has significant hedges, locking in oil prices just under $100.00 a barrel. Approximately 30% of North American natural gas production is hedged for the remainder of 2014 at a weighted average price of $4.55 per million British thermal units (MMBtu).
The Street expects EOG Resources to grow its revenues by about 17% this year and about seven percent in 2015.
Previously in these pages, we looked at Cimarex Energy Co. (XEC), which has been very strong on the stock market since the beginning of February. (See “Where to Find the Best Price Momentum Right Now.”)
This oil and gas growth story is slowing, but the company is still expected … Read More
The spot price of oil has pulled back to the $100.00-per-barrel mark, but oil stocks are holding up extremely well and the price strength is almost across the board, from related services to the big integrated producers.
Earnings expectations for many within the oil group have been going up for this year and next, while valuations, even among fast-growing producers, aren’t generally overdone. Earnings have caught up to share prices over the last couple of quarters.
Not every investor wants to be in oil. But for those who do, the sector can be a key component of an equity portfolio. There’s a lot of income and capital gain potential with related businesses and plenty of options on how to play the industry.
One junior energy producer we’ve been looking at in these pages since early 2013 is Kodiak Oil & Gas Corp. (KOG). This is a highly liquid Bakken oil play and institutional favorite. The company reports after the market closes this Thursday; its news is material for oil and gas speculators.
Kodiak has a very good track record of generating significant production and financial growth. In the fourth quarter of 2013, the company’s oil and gas sales soared to $266.5 million, representing a comparable gain of 104% over the fourth quarter of 2012.
Average production of barrels of oil equivalent per day (boepd) grew to 36,100 in the fourth quarter of 2013, basically doubling the average boepd in the comparable quarter.
Kodiak’s total oil and gas sales in all of 2013 were $905 million for a gain of 121% over 2012. Earnings growth was less robust, as the company … Read More
Oil prices have rallied back to the $100.00-per-barrel level on some near-term supply and inventory concerns.
While the upside move is rewarding the buyers of oil stocks, I don’t think oil prices are set for an extended rally.
The chart of the West Texas Intermediate (WTI) crude oil shows oil prices bouncing higher after the formation of a bullish double bottom, based on my technical analysis. And while oil prices can head higher on the chart, I just don’t see any moves being sustainable.
The catalyst for higher oil prices has more to do with tight inventories driven by a rise in demand. The inventory of oil contracted by 1.5 million barrels per day in October to December 2013, according to the International Energy Agency (IEA). The IEA suggests the demand for oil will rise by 50,000 barrels per day to 1.3 million barrels in 2014. (Source: Johnson, C. and Sheppard, D., “Robust demand tightening oil market, IEA says,” Reuters, February 13, 2014.) If this estimate pans out, oil prices could edge higher and hold above $100.00, but I doubt the move will last that long.
Now, if China jumps out of its sluggish growth (read “Investment Opportunities in Depressed Chinese Stocks”) and Europe can drive its economic renewal, then we could see brighter prospects for oil prices.
On the supply side, America is relying less on the Organization of the Petroleum Exporting Countries (OPEC) and foreign oil as American oil companies continue to squeeze more oil out of the ground, specifically shale oil.
There may even be a time down the road when … Read More
The lull between earnings seasons will soon be here and with the absence of corporate results, trading action can get choppy.
It’s still important to follow transportation stocks and the NASDAQ Composite. Transportation stocks have a tendency to lead the broader market, and outperformance from the NASDAQ Composite (compared to the other major indices) signals speculative fervor remains.
The one commodity that’s very much back in play in terms of a reflection of investor sentiment is oil. West Texas Intermediate (WTI) has come back to the $100.00-per-barrel level on what looks like speculative betting on better economic growth this year.
There were actually quite a few disappointments in big oil’s recent financial results and production is definitely an issue. Both large-cap and small-cap oil stocks have not seen their share prices rise commensurately with oil prices, but some value is finally appearing in this sector.
One company that we looked at previously is Kodiak Oil & Gas Corp. (KOG). This is a Bakken oil play that, until recently, was expensively priced. (See “While Few See It, This Stock Sector Is Getting Risky.”)
Kodiak expects to produce 42,000–44,000 barrels of oil equivalent per day (boepd) this year, which represents about a 45% gain over last year. The company’s stock chart is featured below:
Kodiak reports its fourth-quarter and year-end financial results at the end of this month. Junior oil companies may see their fourth-quarter numbers affected by the severe cold in terms of the number of well completions.
While Kodiak may be considered a hold currently, this position is becoming more attractively valued. The … Read More
Financial metrics are improving significantly for oil stocks, and the commodity’s prices are a combination of speculative fervor mixed with geopolitical events. At $110.00 a barrel for West Texas Intermediate (WTI) crude, drill bit profitability has improved significantly.
I’ve always been an advocate of having one large, integrated oil and gas company (or limited partnership) in a long-term equity market portfolio. There are good dividends to be had and solid prospects for long-term capital appreciation.
But the marketplace is dealing with declining production among the biggest companies, and this is why smaller, domestic producers are now doing much better on the stock market. As is always the case, oil production growth must be combined with spot price growth. When the two are moving commensurately, there’s good money to be made.
As I’ve mentioned a number of times in this column, Kodiak Oil & Gas Corp. (KOG) is a popular Bakken oil play that’s highly liquid and is an institutional favorite. This company boasts excellent potential going forward. However, Kodiak is a stock with a lot of high expectations priced into its share price. (See “My Two Favorite Picks in the Speculative Oil & Gas Sector.”)
One company that I think speculative resource investors should now be putting on their radar is Northern Oil and Gas, Inc. (NOG), which is another junior oil and natural gas producer that operates in Montana and North Dakota.
Northern has been going down steadily on the stock market, as the company has had difficulty growing its production due to infrastructure issues. Specifically, company management cited adverse weather and extended road restrictions as hampering … Read More
I accept that, but what I don’t understand is the surging increase in oil prices. Oil is now more than $106.00 a barrel.
I realize we have the uncertainties in Egypt after the ousting of the country’s former leader Mohammed Morsi by the army. Of course, while Egypt is not a major oil producer, the Suez Canal does run through it. And a huge amount of Middle Eastern oil is carried through the canal to the Mediterranean Sea from the Red Sea.
At the current price for oil, the technical picture continues to point to gains in the near term. But I would look at an upside move in oil prices as an opportunity to sell if you currently have oil exposure. Oil is not in a sustainable upward move or bull market.
But the commodity is still advised for traders. I would expect a return to normalcy in the near future, with oil prices retrenching back to less than $100.00 a barrel.
The chart of the West Texas Intermediate crude (WTIC) oil prices below shows the overextension from the previous sideways channel, with $98.00 on the top end. I doubt the breakout will hold as the underlying fundamentals are not supporting a situation of a demand-supply imbalance.
Chart courtesy of www.StockCharts.com
The U.S. economic recovery is ongoing, but it’s also showing signs of stalling. U.S. companies are struggling to grow revenues and … Read More
The spot price of oil is worth keeping a sharp eye on. With West Texas Intermediate (WTI) oil having jumped past $105.00 a barrel, oil stocks are moving again.
Geopolitical tensions certainly have added a bit of a premium to oil prices, but there’s been resilience in spot well over the last couple of months, and it’s based on the prospects of a stronger U.S. economy.
And that strength in oil prices, while never helpful for consumers, is happening in the face of the highest amount of U.S. crude oil production in 20 years.
The primary consequence of stronger oil prices for the consumer is obviously the bill at the pump. But it’s also in the infrastructure that is struggling to keep up with the production boom. U.S. oil production has overtaken pipeline capacity and railroads are making up for the transportation gap.
In the first half of 2013, 356,000 carloads of crude oil and refined petroleum products were moved by rail, according to the Association of American Railroads (AAR). This equates to 1.37 million barrels of oil being shipped every day, according to the U.S. Energy Information Administration (EIA).
There is now a 60,000-car order backlog for oil railcars in the U.S. market.
Based on the latest 2013 monthly output numbers, the EIA says the U.S. is producing 7.2 million barrels of crude oil per day. The majority of the increase in rail transportation of the commodity is due to the huge growth in Bakken oil production, mostly in North Dakota—which doesn’t have enough pipeline capacity. (I’ll be travelling to the Bakken oil region shortly for a first-hand account … Read More
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