koan - I think Cam's pulling your leg, t'aint no expert. There are many others on the thread who are more qualified, especially when it comes to trying to picking winners.
You're a 20 yr. stock mining co. player so you already know quite a bit about oil & gas, especially small Alta. companies.
Interesting though that you've come over to the oil thread, maybe that means that others will be thinking along the same lines. Welcome at any rate.
You're asking advice, remember what you've paid.....
1. Buy low, sell higher. Sell high, buy lower.
2. O&G is cyclical. Buy with the intent of selling, sell with the intent of buying.
3. Oil prices are hard (impossible?) to forecast. OPEC and perceptions can swing the price on a dime. Volatility is the word.
4. Natural gas prices are impacted by demand. Demand is often determined by weather events.
5. Remember the food chain. The large caps. usually start it off and then if there's rotation the intermediates and juniors eventually pick up some interest. Juniors and very small producers are laggards and very often extremely illiquid.
6. Fundamental info. re: sector. See #reply-3224395 Canadian Handbook of Security Analysis.
7. O&G production eats capital, is risky and is involved with declining assets. Small companies may be more nimble with decision-making when compared to larger cos. however larger cos. can often ride longer through the trough part of the cycle.
8. Declining assets. Reserves and some previous discussion. See #reply-8529023
9. People parts. One of the hardest to quantify however probably the most critical especially when it comes to small cos. Don't under-estimate the importance of luck as well as how mgmt. deals with "luck". Technical expertise hopefully positions a situation to benefit from "luck" however it's ultimately how mgmt. deals with the results that determine whether or not the company keeps moving forward. Drilling exploration prospects is probably another way of saying "luck", some good and some bad. Hedging production may be another, etc.
10. See point #1 above.
koan - hope above does help, re: actual names of some situations that may be worth looking at closer? There are currently many strewn throughout the cdn. oilpatch. Look for situations that don't have an overload of debt (ie. less than 1.5x vs cashflow), have decent portfolio of gas and oil properties that hopefully aren't declining too quickly, have mgmt. that are both respected and seasoned as well as hard workers.
Some folks feel that there still are some profits left in things like BEC Belair just because 2000 cashflow compared to current pricing would appear to be less than 2.0x. In "normal" times the old rule-of-thumb seemed to be to try and buy o&g stocks at less than 3 times price/cashflow and then be looking for reasons to be selling if/when ratio reached 5.0x
Then again, are we (the oil&gas sector) really in normal times?.......
Bottomline. Cyclical. |
