Swift Energy (SFY) -- in response to a PM asking for what I thought about this stock, having seen my posts on the SFY Yahoo board, I believe it has a good chance of appreciating in the short term and thus own a small amount of their Aug. $10 calls. Swift is the E&P stock that the 'Street loves to hate -- short interest as of 4/15 was just under 40% of the total shares out, see nasdaq.com . In deference to the adage that in this business you can't ever stay in the same place, you are either moving forward or you are moving backward, folks who have shorted this stock believe that SFY's inability to significantly increase production in recent years means that they are moving backward -- which is significant given their high debt load.
But I look at Swift as really being 2 companies -- the "old Swift", with a lot of conventional stuff in Louisiana and south Texas that depletes very rapidly and is not all that economic, plus the "new Swift", which as a great gas play going in the extreme western end of the Eagle Ford shale where the wells are paying out in about 9 months, plus some other good oil plays in that south Texas also.
Everyone is fixated on whether or not Swift will be able to execute on plans they had announced many moons ago, to both sell some of their central Louisiana stuff and do a farmout of their Eagle Ford gas stuff, and their inability to get a deal done has no doubt encouraged more short-selling. The fact that production had been declining (even though not by much) didn't help matters either. But in their 1Q earnings report they provided guidance such that they expect 2Q production to be about 3-4% higher than 1Q. To me this indicates that the battleship is finally starting to reverse course and gives reason for optimism.
This is just a hunch, but I suspect that the reason that Swift had been unable to consummate any of their announced deals was that the potential counter-parties were trying to get sweetheart deals under the belief that Swift was under to gun to get a deal done, but since Swift did not find it necessary to give such good terms, no deal was done. Now that Swift's production is back on the upswing it would seem likely that such counter-parties would realize that they would now need to come up with their offers if they want to get a deal done with Swift.
As with every investment I make I don't have a particular price target in mind but given the particular security I bought in this case it can be gleaned that I believe the stock will by over $12.50 by August. |
