Paul, I believe your buy is still premature, here are some reasons:
a. You cite good management. I have not seen any particular good management decisions in the last two years (some bad one with the floorless and worse ones with not exploiting correctly their existing reserves or "pseudo reserves")
b. The oil patch in general is nearing a peak (I deserted TLM recently just under $39 it is now around $30 and I expect further weakness). OPEC's goal is to keep oil in the $25 to $28 range, we are still well above this, and usually when a down trend starts to establish itself it accelerates beyond the original intended boundary.
c. We still have an overhang of debentures which by the coming June will be floorless, with a potential weak market in general the approaching date of these debentures becoming floorless, you can expect shorting to start and hit the stock every time it gets to a given "acceptable" level to those "shorters".
d. I start and "see" some major fissures in the Asian economies which will have a negative impact on oil consumption in that part of the globe, and thus downward pressure on crude, and of course when crude catches a cold, minor exploration plays get pneumonia. I still believe that you can get this stock under $2.5, probably even under $1.5.
If you insist on owning a piece of this, my advice (and it is worth $.02) is to enter very slowly and at decreasing prices, you can always jump in big at a higher price when the uptrend is more established, since if such an uptrend were to appear (act of God?), it could take the stock to $10/$13.
Good luck
Zeev |
