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.

Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Gary Burton who wrote (40495)	3/21/1999 1:59:00 PM
From: SliderOnTheBlack	Read Replies (1) \| Respond to of 95453

RRC & CRK; .... (haven't followed PPP)... CHK CEO interview ! I prefer RRC to CRK (Razor's Altman model aside ) - maybe 65:35. I prefer RRC for the primary reason that they have ''premium'' properties to either sell outright, or to bring in investor/ strategic partners. They also have a substantial east coast Nat Gas base with premium pricing. Actually I liked CWEI the best for trading here of late; but that was near/under $3 - it's allready started to move a bit - short term profit target from $3 is $4 7/8 -$5 and then $8. In all fairness; there may be 50% of all Drillers, Service and E&P companies with balance sheets and debt/equity ratio's above .60/.70 that fail the model.With E&P's mandated to take these writedowns - a high percentage would fail the model imho. I don't think we will see many actual failures, certainly not to any degree that might be predicted by the Altman model. This is not to dismiss the models value, nor to dismiss the value and safety of buying low debt, financially solid companies here. This should be the bulk of any Oilpatch portfolio; but what we are talking here is ''Elephant Hunting'' - swinging for the fences - hitting the home run.... getting the ''double, or triple'' return on our investment in the nearterm. The asset writedowns required in a deteriorating commodity price enviroment are a bit misleading fundamentally. We are also, right at the turning point of the end of the rapid decline in commodity prices/writedowns and perhaps reversing to the opposite pole of rapidly rising commodity prices and the cooresponding positive valuation corrections. If we are truly ''reversing'' here in commodity prices - can there mathematically be a better time to buy E&P's ? We literally have just had the year end writedowns released, simultaneously to a 40% after the fact rise in crude Oil prices and an substantial upward revision by analysts in Nat Gas prices going forward. A risk ? - yes. But has the ''timing'' of the mathematical formula of asset writedowns/valuation accounting requirements and reversing commodity price movement and its effect on earnings & cash flow, in a depressed share price enviroment, with massive negative investor sentiment; ''ever'' converged so quickly ? Has there ever been a more upside leveraged buying opportunity ? Risk? - yes, but this is also in my opinion, much over discounted into current shareprices. Many small/micro caps are under Institutional Investors radar screens due to #1 Market Cap, #2 due to fundamental financial screening criteria and in my opinion; this gives a weighted advantage to the individual investor who does the homework and finds the anomalies, the exceptions and the winners in this sector. It doesn't take much homework to buy safe, solid companies here. You can find that list anywhere and everywhere. What I am trying to do is find the over-discounted, misunderstood and under appreciated companies that are most leveraged to the reversal in commodity pricing. Again, I want to point out that my suggestions are for a ''DD'' research list and that the RRC's, CRK's, AXAS's, FEN's are for the high risk oriented sector of the portfolio for only those who have the risk/reward tolerance and are interested in a research list of these types of ''plays.'' The pure exploration plays of FXEN, SEV, HEC, are also risk oriented as well. The Chevron's, Exxon/Mobils , Phillips, Arco's Marathon's or the Burlington Resources, or Noble Affiliates are the safe solid plays and a good choice for conservative investors. I love ARC/Arco - (owns a chunk of VRI/ Vastar) & MRO/USX - Marathon here. But for those that want to take on some risk, but want the cooresponding potential upside rewards; the upside potential in these stocks vs. the risk; will never be more in favor of the individual investor than right here, right now...imho. Many middle ground risk/reward value plays are also available here. I love APA/Apache here; it should be a must own in any E&P portfolio. They are an industry leader, have a great portfolio of International Exploration properties and a respected record of success and are a solid value here - start with a buy of APA here on ''any'' dips averaging into a substantial position. APA is also in a position to make acquisitions here. APC/Anadarko is another Industry leader - with an absolute top tier track record in exploration - but their present valuation refelects that imho, just not enough nearterm upside left.... The new OEI/SGO combination is an oversold,highly leveraged upside play as well that has yet to move substantially and is well off of its Sept-Nov highs of late. In small caps; MARY, EVER, MLRC and BEXP - (who just received a $50 Million cash infusion from Enron for example), are more moderate risk/reward, solid growth selections. These companies have substantial growth prospects and are not at the risk levels of RRC, CRK etc. UPR is another high debt, but highly leveraged company worth a look here. A few analysts have Buy ratings on UPR here with nearterm price targets 50% from its current price. NFX & NEV are two names that have had solid institutional buying of late. NEV a more ''heavy Oil'' leveraged company is benefiting from the current rise in Crude Prices and NFX more Gas oriented, has received a substantial price increase from insitutional buying. NFX does not have quite as much upside left as such - but these companies are an example of the coming institutional interest and the potential appreciation moves possible. Another special situation company that I love is microcap PGEI. This is an intriguing company. It has huge inside ownership and an especially small stock float which will highly leverage it to the upside on any positive news. This little gem also has - virtually no (actually little) Debt ! Good insider buying in the past; has a coal bed methane play similar to EVER. Company has been referred to as an ''early stage EVER'', but also has Crude Oil holdings as well. A recent Interview on the Wall Street Transcripts - featured CEO Murdock and presented PGEI's long term property development strategy. - worth a look... biz.yahoo.com Many Institutional & individual investors, will arrive late - they want to know there is a formal and final OPEC agreement, they want to see actual increases in commodity prices - not just the analyst revisions and increased expectations. They want to see the actual changes on the balance sheet. However; we have all ready seen in the Driller & Service arena, a near 50% accross the board bounce from these stocks bottoms. Many E&P's are now starting to move, we have a few of these highly leveraged, speculative companies that are just starting to turn and unlike their Driller & Service bretheren - they reap the actual bottom line benefits of higher Crude Oil & Natural Gas prices immediately. Here is a great article link; from CHK's CEO Aubrey McClendon - a must read on the subject of ''leverage and upside stock potential''... I have not followed CHK that closely, but this article is an insight from a CEO's perspective on leverage within the Industry. messages.yahoo.com@m2.yahoo.com good luck.