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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (38654)	7/31/2010 4:05:24 AM
From: elmatador	Respond to of 78748

bailed out companies that would have otherwise fallen short of expectations. South America has been an ace in the hole for U.S. companies' second-quarter earnings. Message 26722779

To: Paul Senior who wrote (38654)	7/31/2010 2:15:39 PM
From: E_K_S	Read Replies (1) \| Respond to of 78748

Hi Paul - I am having a hard time calculating the value of these e&p companies based on their assets, earnings, productive wells drilled or any other typical value metric. So, I am scanning blogs ( bakkenshale.blogspot.com ) that discuss recent sucessfull drilled wells, industry chatter and new permits filed; and discover a potential e&p candidate AEZ but find out that HES is acquiring the company. From my initial review of AES, it seemed like a good potential e&p candidate but certainly not a value play. Perhaps a good speculation. Hess Backs Up the Truck fool.com From the article:"...This week, Hess filled out its considerable Bakken acreage with the acquisition of American Oil & Gas (AMEX: AEZ) in an all-stock deal. The transaction will add around 85,000 net acres to Hess' land position, which weighs in at more than half a million acres. Prior to this acquisition, Hess had set a production target of 80,000 barrels per day by 2015..." Companies mentioned in this article: CLR,HES,BEXP,AES,NOG,OAS finance.yahoo.com I have come to the conclusion that the "value play" is to buy shares in the companies that are acquiring these small e&p companies. Even those with earnings typically sell for a high PE but as new production wells come online, their forward PE falls near *value territory*. Have you looked at any of those companies mentioned in the article above? Northern Oil and Gas, Inc. (NOG) looks interesting as it is close to a pure play w/ next years earnings estimated around $1.00/share making their 2011 PE around 15. It would seem to me that an acquiring company has better information that you or I might have regarding a specific small e&p company. They should be able to buy the assets on the cheap and through scale bring out the highest value of their production wells. I do like your thought of tracking similar foreign buyers because they are probably doing the same thing. The sovereign funds are another source of funds. They are just way too big and have limited knowledge in making such specific investments. It would make more sense for them to buy a large interest in some of these acquiring companies and take advantage of their expertise. EKS