Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (66997)	8/5/2005 1:05:59 PM
From: energyplay	Read Replies (3) \| Respond to of 74559

I need to shift more back to energy, having had over 50% in biotech (pretty happy about the biotech investments, but not dancing on the ceiling - I got in a little bit late). FTK - Flotech - makes improved valves for pumpjacks. Appears this stock will step up almost every quarter around earnings report time. Small company with major growth rate from improved product. EOG - Lots of US natural gas, CEO (Mark Papa) well known and well regarded by most in the industry and Wall Street, a stock instituions feel comfortable owning. They are UNHEDGED. Downside is they have a higher P/E than other US Natural gas firms, so some of the upside is already in the stock price. CHK - Cheasepeake These guys spent the past 6 years paying top dollar for gas and oil rights, mostly in Oklahoma. They issued lots of debt, preferred stock, and other instruments to pay for these acquisitions. So they have some leverage. This now looks like a very smart move. Also, many of the debt buyers hedged or financed their debt purchases by shorting CHK stock. As the debt is either paid off or the price rises with inmproved credit ratings, these shorts are wound up (buy to cover). This keeps upward pressure on the stock, and tends to put a 'bid' under the price, reducing downward volitilty. A 3 year chart of CHk is a thing of beauty.... The debt issues usually had requirements that some large fraction of the oil and gas producion was to be hedged for a few years. These hedges tend to expire, or roll up to higher prices. As the debt is paid off, converted, or defeased, the hedges go away. Also, as work is done on the properties to increase production, the additonal production is not subject to the old hedges... But wait, there's more ! Almost everything CHK bought is in or very near to Oklahoma - so they have dozens of large properties in close proximity. This allows economies of scale and reduced travel time for manitence, workovers, and additional infield drilling. Still more : Most of the properties in Oklahoma has multiple zones - some at lower levels, some higher than where current production is occuring (known as "behind pipe") Much of these levels are not counted in the reserve calculations that set the prices paid for the properties. Moderate investment can often bring large increases in production. The sell side of Wall Street has liked CHK because of all the fees from the debt issues. Now the buy side likes CHK more and more as debt becomes less of a risk, and the higher market cap makes CHK more liquid CHK has increasing production and also the elements of a moderately leverage asset play. Peyto PEYUF - is an asset building machine. Has a good chart. They have a GREAT educational web site that compares Can Roys. ****** I also intend to review most of the stocks mentioned on the Boom Boom ROOM, especailly everything Ed Ajootian has bought. I recently bought some ARD, and I am happy so far. I also am looking at Canadian trusts that Taikun, Tommaso, Seeker of Truth, and others like. **************************************** I want to state that I am VERY greatful to everyone on SI and the Yahoo boards who has may useful suggestions for energy stocks an my understanding of the energy business.