Time to look for a bottom in oil and pick a warrant or two that could ride a revival.
Don't know this is the right one, this bankers pete, since the 09 exp is too soon and the 2012 exp is ridiculously expensive right now. but as background here is a piece out tonight by david pescod at canaccord.
first here is the bankers pete chart. wow!
stockcharts.com
DAVID PESCOD'S STOCKTALK LATE EDITION JAN. 19
BANKERS PETROLEUM (T-BNK) $0.67 -0.01
CRUDE OIL $40.93 -1.64
The chart to the left shows how beaten up Bankers Petroleum
has been between the markets going off a cliff, oil
prices going into the tank and the ever-present credit crisis.
While many people love the huge deposit they have in Albania
and management led by Abby Badwi was so successful
in Rally Energy, there is still one huge concern out there
these days...what next for the price of oil?
We notice with the recent quarterly update by Bankers,
that all the analysts have taken a hard look and come up
with their ideas of what next for Bankers. And their ideas
are all over the place. Genuity Capital has a target of $1.50;
Tristone $1.40; BMO has a target of $2.00; Raymond James
$2.00; Canaccord $2.50 and Thomas Weisel $2.70. Considering
all of these are only half of what the stock had seen
previously, that tells you the kind of environment we are in.
While analysts never seem to come up with the same
kind of targets, one of the big differences these days is
what their expectations are for oil prices down the road.
Right about now it feels as if the world economies are all
going into the tank at the same time and without the
Saudi’s cutting back production, oil could be where?
Twenty dollars a barrel? So predicting what next for oil
prices has become a huge factor in how to play oil stocks
as there are very few who expect anything great for oil
prices in the next four or five months.
Previous mega-bull on oil prices Andy Gustajtis has
been surprised by the drop in demand in China and the
United States and has gone from the camp of expecting oil
to be $60 on July 1st and $80 by Christmas of this year to
$40 this July and $60 by Christmas.
We sit in on a presentation by Seyed Jazayeri, a senior
research director with the Canadian Energy Research Institute
and he can see oil finally hitting $60 by Christmas...but
that’s Christmas of 2010. He doesn’t see much until then.
We interviewed David Prince a while ago and he is expecting
$75 by the third quarter of this year. So opinions
are still all over the place and most of it has everything to
do with just when world economies can show a sign of recovery
and of course, commodity markets and equity markets
always looking somewhere between and four and eight
months ahead.
Anyone picking up oil stocks at this time has to have a
belief on a certain oil price down the road because at current
oil prices, there are not a lot of projects that make economic
sense (and there’s even more natural gas projects
that at these levels in North America, make no sense at all).
We note of interest some of the insider trading in Bankers
Petroleum where many of the executives and directors
have been picking up stock themselves. Doug Urch, Vice
President is one of them and we note his prognostication
that oil will be $60—$65 by this coming Christmas and has
his own hopes for Bankers’ stock.
Today at a conference in London, England, Bloomberg
reports that Goldman Sachs’s commodity analyst Jeffrey
Currie said he expects “a swift and violent rebound in energy
prices in the second half of the year.”
He suggests that “Oil prices may have reached their lowest
point already, after falling to $32.40 in mid-December,
and are expected to rise to $65 by the end of this year.
There is scope for a “new bull market” in oil”.
He does however point out that “World oil demand is
likely to fall by about 1.6 million barrels a day this year”
which is bigger than numbers anticipated by the International
Energy Agency.
He also points out that the contango game is probably
near the end of its process and suggests, “The contango is
likely to flatten as supply cuts by OPEC and other producers
take effect.” Needless to say, $65 which would have
seemed such a low price a long time ago, now looks like it
could be a savior for many oil and gas companies, currently
struggling under low prices.
If we do get there by Christmas, that’s a huge increase
from current levels and could make stocks like that of Bankers
and many others, look a lot better...but at a time like this,
you make your own bets on where the price of oil and the
economies will be.
Disclosure: Bankers Petroleum: Canaccord Capital covers this stock and has a Buy rating on it. (Buy: The stock is expected to generate
risk-adjusted returns of over 10% during the next 12 months.) |
