24/7 Wall St. » FST

Short Sellers Cast a Wide Net (ACI, XCO, SD, FST, XOM, DUK, AMD, SNY, PFE, NOK, BKS, SVU, PBI, DV, BPI)

Paul Ausick — Thu, 10 May 2012 15:03:31 +0000

The energy sector saw a lot of activity from short sellers in April, but other stocks saw some action as well. We’ve already covered some of the bigger names here and some of the cult stocks here.

Arch Coal Inc. (NYSE: ACI) saw a gain of 18.7% in short interest as of for the two weeks ended April 30th. More than 6.6 million shares were added to short interest and 20% of the company’s float is now short. The coal miner’s poor earnings and forecast are to blame.

Short interest in Exco Resources Inc. (NYSE: XCO) rose nearly 12% to more than 33.5 million shares, or 19.3% of the company’s float. The oil & gas driller missed revenue expectations, although it did post a profit. Revenue is more important now however.

Among the largest overall short positions, SandRidge Energy Co. (NYSE: SD) got short interest on 49.5 million shares, nearly 12% of its float and up 6.7% from the previous reporting period. Shares are down more than -33% in the past 12 months, and the small spikes don’t affect short sellers here. The long-term outlook for natural gas continues to call for weak pricing.

E&P company Forest Oil Co. (NYSE: FST) was another recipient of more short interest in late April. Short sellers added about 3 million shares, a 24.7% increase and enough to put nearly 13% of the company’s float short.

Even Exxon Mobil Corp. (NYSE: XOM) didn’t escape. Short sellers added 7.7 million shares to their positions, a 31.8% change to 32 million shares, but still less than 1% of Exxon’s shorts.

The final energy company we’ll look at here is Duke Energy Corp. (NYSE: DUK), where 5.8 million additional shares were added to short positions, bringing total shorts to just over 79 million shares. That’s an addition of 8% and represents 5.9% of Duke’s float. It’s odd to see a utility on this list.

Advanced Micro Devices Inc. (NYSE: AMD)saw short interest in its share rise by 6.5% to more than 70 million shares or 11.9% of the company’s float. AMD continues to suffer from lower-than-expected earnings and revenues.

Short interest in Sanofi (NYSE: SNY) jumped 265% to more 13.4 million shares. While still only about 0.5% of the company’s float, but generic drug sales are hurting the company as is a weak economy in Europe. Neither condition is expected to improve soon either.

Short interest in Pfizer Inc. (NYSE: PFE) also rose sharply, buy 21.4% to reach a total of 63.6 million shares, about 0.8% of the company’s float. Like Sanofi, competition from generics hurts. The company also said it will reduce marketing expenditures on its Lipitor drug.

Nokia Corp. (NYSE: NOK) gets the honor for being the equity with the largest number of short shares, 195 million, which represents 5.2% of the company’s float. The good news is that short interest fell by more than 32 million shares, also the largest change.

More than 75% of Barnes & Noble Inc.’s (NYSE: BKS) float is short, about 19.8 million shares. Short interest in the company grew by just 700,000 shares since mid-April.

Short interest holds more than 42% of grocer SuperValue Inc.’s (NYSE: SVU) shares with a total of 88.5 million shares short, up slightly from two weeks ago.

Short interest in Pitney Bowes Inc. (NYSE: PBI) actually fell slightly , but the company’s total of 50.5 million shares short represents 25.3% of the float and 22 days to cover.

Short interest in for-profit educator DeVry Inc. (NYSE: DV) jumped 123.2% to 3.7 million shares or 6.3% of the company’s float. Another education company, Bridgepoint Education Inc. (NYSE: BPI) posts short interest of more than 9.7 million shares, or 56% of its float.

Paul Ausick

Filed under: Short Interest Tagged: ACI, AMD, BKS, BPI, DUK, DV, FST, NOK, PBI, PFE, SD, SNY, SVU, XCO, XOM

Top Analyst Upgrades & Downgrades (ARMH, AVB, GCI, DECK, FSLR, FST, MNST, MAR, NBR, POL, RRGB, SUN, CRM, TGT, TSL)

Administrator — Fri, 24 Feb 2012 13:22:03 +0000

These are some of this Friday’s top analyst upgrades, downgrades, and initiations seen in Wall Street research calls.

ARM Holdings PLC (NASDAQ: ARMH) Started as Overweight at Piper Jaffray.
AvalonBay Communities, Inc. (NYSE: AVB) Raised to Outperform at Credit Suisse.
Gannett Co., Inc. (NYSE: GCI) Started as Equalweight at Barclays.
Deckers Outdoor Corporation (NASDAQ: DECK) Cut to Neutral at Credit Suisse; Maintained Buy with $105 target at Canaccord Genuity.
First Solar, Inc. (NASDAQ: FSLR) Cut to Neutral at Susquehanna.
Forest Oil Corporation (NYSE: FST) Cut to Hold at Canaccord Genuity.
Monster Beverage Corporation (NASDAQ: MNST) Reiterated Conviction Buy List and raised estimates by Goldman Sachs.
Marriott International, Inc. (NYSE: MAR) Raised to Conviction Buy List at Goldman Sachs.
Nabors Industries Ltd. (NYSE: NBR) Raised to Buy with $30 target at Argus.
PolyOne Corporation (NYSE: POL) named as Value Stock of the Day at Zacks.
Red Robin Gourmet Burgers (NASDAQ: RRGB) named as Bull of the Day at Zacks.
Sunoco, Inc. (NYSE: SUN) Cut to Underperform as Bear of the Day at Zacks.
Salesforce.com (NYSE: CRM) Maintained Neutral but raised target to $145 on Credit Suisse; Raised to Buy at ThinkEquity; Reiterated Buy and raised target to $170 at Canaccord Genuity.
Target Corporation (NYSE: TGT) Raised to Buy at Jefferies.
Trina Solar Limited (NYSE: TSL) Cut to Market Perform at Wells Fargo; Cut to Negative at Susquehanna.

If you enjoyed the top analyst upgrades and downgrades, you can sign up in the box below to join our morning email list to receive news directly in your inbox each morning. We include major analyst upgrades and downgrades, IPO and M&A news, special situation developments, observations on Warren Buffett and key market gurus, as well as special exclusive feature stories.

JON C. OGG

Filed under: 24/7 Wall St. Wire, Analyst Calls Tagged: ARMH, AVB, CRM, DECK, FSLR, FST, GCI, MAR, MNST, NBR, POL, RRGB, SUN, TGT, TSL

24/7 Wall St. Closing Bell (INTC, KALU, NOR, MA, V, BBY, FDS, FCEL, PTRY, MILL, LIVE, SYNO, RVSN, ECYT, IVN, GMCR, FST)

Paul Ausick — Tue, 13 Dec 2011 21:09:38 +0000

Stocks opened firmly higher this morning and the DJIA rose by more than 130 points in the first hour of trading. The dollar gained strength against the euro putting more enthusiasm into the market. Investors were also hoping that the Fed would indicate that a new round of quantitative easing would be available instantly if necessary. That didn’t work out however, and equities tumbled following the Fed’s mid-afternoon statement. Crude oil also rose on a threat from Iran to block the Strait of Hormuz. WTI crude is up more than 2%, at $99.81/barrel after topping $100 earlier in the day, and Brent crude is up 1.9% at 109.30/barrel. Gold is down nearly -2%, at $1,636.90.

The unofficial closing bells put the DJIA down more than 66 points to 11,954.94 (-0.55%), the NASDAQ fell nearly 33 points (-1.26%) to 2,579.27, and the S&P 500 fell -0.87% or nearly 11 points to 1,225.73.

There were several analyst upgrades and downgrades today, including Intel Corp. (NASDAQ: INTC) maintained ‘outperform’ but estimates cut at Credit Suisse and maintained ‘hold’ with a $24 price target at Canaccord Genuity. Other ratings actions today include Kaiser Aluminum Corp. (NASDAQ: KALU) started as ‘buy’ at BofA/Merrill Lynch; Noranda Aluminum Holding Corp. (NYSE: NOR) started as ‘buy’ at BofA/ML; Mastercard Inc. (NYSE: MA) and Visa Inc. (NYSE: V) both started as ‘buy’ at Nomura.

Here are today’s post-earnings news reactions with prices during the last half-hour of trading: Best Buy Co. Inc. (NYSE: BBY) is down more than -15.5% at $23.68 (more details here); FactSet Research Systems, Inc. (NYSE: FDS) is down more than -8% at $87.01; FuelCell Energy Inc. (NASDAQ: FCEL) is down more than -15% at $0.93; The Pantry Inc. (NASDAQ: PTRY) is down more than -12% at $10.41, after posting a new 52-week low earlier today of $9.52; and Miller Energy Resources, Inc. (NYSE: MILL) is down nearly -11% at $2.90.

Other standouts from today include the following stocks:

LiveDeal Inc. (NASDAQ: LIVE) is up more than 236%, at $4.88. The customer acquisition company issued 1.6 million shares of new stock, raising its capital by by $2 million and enabling it to meet Nasdaq listing requirements.

Synovis Life Technologies, Inc. (NASDAQ: SYNO) is up more than 50%, at $27.78. The medical device maker agreed to be acquired by Baxter International Inc. (NYSE: BAX) for $28/share, a 52% premium to the stock’s Monday closing price. The deal is worth $325 million.

RADVision Ltd. (NASDAQ: RVSN) is up more than 14%, at $9.62. The communications equipment maker is said to be an acquisition target for Avaya at a price of around $200 million.

Endocyte Inc. (NASDAQ: ECYT) is down more than -65%, at $3.56, a new 52-week low. The pharmaceutical maker announced that trials of a new cancer drug have not shown that the drug helps patients live longer.

Ivanhoe Mines Ltd. (NYSE: IVN) is down nearly -22%, at $16.16. The junior miner lost a court decision to Rio Tinto plc (NYSE: RIO) which essentially kills Ivanhoe’s poison pill plan. Rio owns 49% of Ivanhoe and can maintain that stake regardless of new share issuances until April 2013.

Green Mountain Coffee Roasters, Inc. (NASDAQ: GMCR) is down more than -11%, at $50.03. The coffee merchant has lost some market share for its single-cup coffee products, and prices are also falling.

Forest Oil Corp. (NYSE: FST) is down nearly -13%, at $14.01. The oil & gas E&P company announced its outlook for 2012, and analysts were disappointed with the level of capital expenditures and cash flows.

Stay tuned for Wednesday. Dennis Lockhart, president of the Atlanta Federal Reserve Bank, is giving a speech in the morning. Here are some other noteworthy events on the schedule (all times Eastern):

7:00 a.m. – Mortgage Bankers Association purchase applications
10:30 a.m. – EIA weekly petroleum status report
1:00 p.m. – 30-year Treasury bond auction

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: BBY, ECYT, FCEL, FDS, FST, GMCR, INTC, IVN, KALU, LIVE, MA, MILL, NOR, PTRY, RVSN, SYNO, V

Bakken Shale Bursting with Oil, Opportunities (OXY, HES, MRO, EOG, BEXP, CLR, CXO, KOG, FST, SGY, WLL, AXAS, AREX, TPLM, RPC, TLLP)

Administrator — Wed, 24 Aug 2011 14:40:12 +0000

One of the reasons that the Bakken shale deposits in North Dakota and Montana get relatively little attention is that none of the big integrated oil companies have much presence there. There are some big players there, including Occidental Petroleum Corp. (NYSE: OXY), Hess Corp. (NYSE: HES), Marathon Oil Corp. (NYSE: MRO), and EOG Resources, Inc. (NYSE: EOG). But these are not the companies with the largest lease-holdings.

That honor falls to smaller oil producers including Brigham Exploration Co. (NASDAQ: BEXP), Continental Resources, Inc. (NYSE: CLR), Concho Resources, Inc. (NYSE: CXO), Kodiak Oil & Gas Corp. (NYSE: KOG), Forest Oil Corp. (NYSE: FST), Stone Energy Corp. (NYSE: SGY), Whiting Petroleum Corp. (NYSE: WLL), Abraxas Petroleum Corp. (NASDAQ: AXAS), Approach Resources Inc. (NASDAQ: AREX), and Triangle Petroleum Corp. (AMEX: TPLM). Among services companies RPC Inc. (NYSE: RES), which doesn’t currently have any presence in the Bakken, is looking to join the bigger players up in the north country. A midstream company that is expanding its presence in the Bakken is Tesoro Logistics LP (NYSE: TLLP), a recent spin-off from refiner Tesoro Corp. (NYSE: TSO).

And last week, SemGroup Corp. (NYSE: SEMG) announced that it plans to create a new midstream company, Rose Rock Midstream LP, through a $181 million IPO. Rose Rock owns and operates a gathering, storage, transportation, and marketing business in the Bakken.

Current production from the Bakken shale is about 360,000 barrels/day and there are those who believe that figure will reach well over a million barrels/day in another five years. The US Geological Survey estimates about 4.4 billion potential barrels from the Bakken. Continental Resources’ chairman suggests that the real potential is about six times that.

Whatever the production, the problem remains how to get the oil to market. More pipelines are needed to get the oil to somewhere other than the market hub at Cushing, Oklahoma. The Bakken’s crude competes with the heavy crude coming from the Alberta oil sands for pipeline space and markets. Rail and truck transportation currently haul most of the Bakken’s crude.

A substantial portion of the Bakken’s production is transported by rail, which is far more expensive than pipeline transportation. But the high prices for crude are boosting rail transportation from the Bakken to the Gulf Coast to around 100,000 barrels/day this year. Some analysts think that number could triple by the end of 2012.

And there’s no end in sight for the transportation bottleneck. Proposed pipelines, like the Keystone XL, face opposition from environmental groups, and another proposal for a pipeline from Cushing to Houston died for lack of shipper interest.

The pipeline shortage can’t last. Moving crude by truck and rail is more expensive and far more likely to result in a massive spill than is pipeline transportation.

Transportation problems aside, the Bakken is booming now and is likely to continue growing for years.

Paul Ausick

Filed under: Oil & Gas Tagged: AREX, AXAS, BEXP, CLR, CXO, EOG, FST, HES, KOG, MRO, OXY, RPC, SGY, TLLP, TPLM, WLL

Top Analyst Upgrades & Downgrades (AET, AIG, AXAS, AMAT, FST, FOSL, IBM, KAI, KLAC, NFLX, NE, NOR, OPEN, RAVN, STX, SBUX, TLAB, WDC, YUM)

Administrator — Thu, 07 Jul 2011 12:27:10 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Thursday morning.

Aetna Inc. (NYSE: AET) Reiterated Buy and raised target to $51 at Argus.
American International Group Inc. (NYSE: AIG) Reinstated as Neutral with $32 target at Credit Suisse.
Abraxas Petroleum Corp. (NASDAQ: AXAS) Maintained Buy with $6 target at Canaccord Genuity.
Applied Materials Inc. (NASDAQ: AMAT) Maintained Buy but cut price target to $19 at Argus.
Forest Oil Corporation (NYSE: FST) Cut to Underperform at BofA/ML.
Fossil, Inc. (NASDAQ: FOSL) Cut to Hold at S&P Equity Research (late-Wednesday).
International Business Machines Corp. (NYSE: IBM) Cut to Market Perform at Wells Fargo.
Kadant Inc. (NYSE: KAI) Maintained Buy as Value at Zacks.
KLA-Tencor Corporation (NASDAQ: KLAC) Raised to Buy at UBS.
Netflix, Inc. (NASDAQ: NFLX) Reiterated Buy and raised target to $325 at BofA/ML.
Noble Corporation (NYSE: NE) Cut estimates and Target at Canaccord Genuity; Reiterated Buy at Argus.
Noranda Aluminum Holding Corp. (NYSE: NOR) Cut to Underperform at BofA/ML.
OpenTable, Inc. (NASDAQ: OPEN) Reiterated Buy with $115 target at Canaccord Genuity.
Raven Industries (NASDAQ: RAVN) Reiterated Outperform as Bull of the Day at Zacks.
Seagate Technology PLC (NASDAQ: STX) Raised to Overweight at JPMorgan.
Starbucks Corporation (NASDAQ: SBUX) Cut to Neutral at Goldman Sachs.
Tellabs, Inc. (NASDAQ: TLAB) Cut to Underperform as Bear of the Day at Zacks.
Western Digital Corporation (NYSE: WDC) Raised to Overweight at JPMorgan.
Yum! Brands, Inc. (NYSE: YUM) Cut to Sell at Goldman Sachs.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Filed under: Analyst Calls Tagged: AET, AIG, AMAT, AXAS, FOSL, FST, IBM, KAI, KLAC, NE, NFLX, NOR, OPEN, RAVN, SBUX, STX, TLAB, WDC, YUM

Top Analyst Upgrades & Downgrades (AMSF, AAPL, ARUN, BDX, BIIB, GLW, FST, JBL, MU, MMI, OXY, RIMM, SHLD, SPWRA, SRDX, SNCR)

Administrator — Tue, 21 Jun 2011 12:28:01 +0000

These are some of the top analyst upgrades, downgrades, and initiations seen from Wall Street research calls this Tuesday morning.

Amerisafe, Inc. (NASDAQ: AMSF) Cut to Underperform as Bear of the Day at Zacks.
Apple Inc. (NASDAQ: AAPL) Maintained Outperform but cut target to $420 at Oppenheimer; Maintained Outperform; Zacks cautious on iPad3 launch.
Aruba Networks, Inc. (NASDAQ: ARUN) Started as Outperform at Morgan Keegan.
Becton Dickinson & Co. (NYSE: BDX) Reiterated Buy and Raised target to $96 at Argus.
Biogen Idec Inc. (NASDAQ: BIIB) Raised to Buy with $129 target at Deutsche Bank.
Corning Inc. (NYSE: GLW) Reiterated Buy and $26 target at Argus; Cut estimates at BofA/ML.
Forest Oil Corporation (NYSE: FST) Started as Outperform at Credit Suisse.
Jabil Circuit Inc. (NYSE: JBL) Cut to Strong Sell at S&P Equity Research (late-Monday).
Micron Technology, Inc. (NASDAQ: MU) Maintained Buy but cut estimates at BofA/ML.
Motorola Mobility (NYSE: MMI) Cut to Underperform at Credit Suisse.
Occidental Petroleum Corporation (NYSE: OXY) Started as Neutral at Credit Suisse.
Research in Motion Ltd. (NASDAQ: RIMM) Cut to Neutral at Credit Suisse.
Sears Holdings Corporation (NASDAQ: SHLD) rating cut to ‘B’ and outlook negative at Fitch.
SunPower Corporation (NASDAQ: SPWRA) Raised to Hold at Wunderlich.
SurModics, Inc. (NASDAQ: SRDX) Maintained Outperform as Bull of the Day at Zacks.
Synchronoss Technologies, Inc. (NASDAQ: SNCR) Added to Conviction Buy List at Goldman Sachs.
Wendy’s/Arby’s Group Inc. (NYSE: WEN) Raised to Hold at Argus.

JON C. OGG

Filed under: Analyst Calls Tagged: AAPL, AMSF, ARUN, BDX, BIIB, FST, GLW, JBL, MMI, MU, OXY, RIMM, SHLD, SNCR, SPWRA, SRDX

The Eight Big Spin-Offs To Watch For 2011 (AMR, MT, CVC, FST, FO, LORL, MOT, NOC, HHC, GGP, MSG)

Administrator — Wed, 15 Dec 2010 12:35:31 +0000

2010 has been a positive year for the markets. IPOs and secondary offerings have been plentiful, debt offerings have been plentiful, and restructurings continue. Many spin-offs have been announced and will occur as we enter 2011. This marks the return of an old trend that will make investors look forward to more deals in 2011 and beyond.

AMR Corp. (NYSE: AMR), ArcelorMittal (NYSE: MT), Cablevision Systems Corporation (NYSE: CVC), Forest Oil Corp. (NYSE: FST), Fortune Brands, Inc. (NYSE: FO), Loral Space & Communications Holdings Ltd. (NASDAQ: LORL), Motorola Inc. (NYSE: MOT), and Northrop Grumman Corp. (NYSE: NOC) are all either planning spin-offs or are considering them. There is also a winner so far in 2010 in The Howard Hughes Corporation (NYSE: HHC) from General Growth Properties (NYSE: GGP). We have provided some basic information and color on each below.

1. AMR Corp. (NYSE: AMR), the parent of American Airlines, has wanted to unload American Eagle for years. What has prevented a deal has been the bad economy and high fuel prices. It was back in the summer that AMR disclosed that it had revived plans that could ultimately lead to a sale, divestiture, or even a spin-off. If the airline sector remains in favor this tranasaction could finally occur in 2011. AMR shares are trading around $7.75 and the 52-week trading range is $5.86 to $10.50. AMR peaked above $35.00 in early 2007. If this will assist in its attempt to regain a former glory, they will likely jettison the regional unit.

2. ArcelorMittal (NYSE: MT), the international steel giant, has recently confirmed that the stainless steel business will be spun off to shareholders. The plan is to distribute shares in the first quarter of 2011 at a ratio of one share of the stainless steel business for every twenty ArcelorMittal shares. With shares around $37.00, its 52-week trading range is $26.28 to $49.41.

3. Cablevision Systems Corporation (NYSE: CVC) has already spun off Madison Square Garden, Inc. (NYSE: MSG) in February 2010. Now the Dolan family is looking at the same possibility for Rainbow Media. In November, the Dolans announced that the board of directors gave authorization to explore a possible spin-off of Rainbow Media. If this occurs, Rainbow Media would become a separate public company with its holdings being national programming, IFC, and Rainbow Network. Cablevision shares are very close to $35.00 and its 52-week trading range is $21.53 to $35.16.

Filed under: ADR, Calendar, Conglomerates, Corporate Governance, Dividend, Editor's Picks, IPOs, Mergers and Buy Outs, Secondary Offering, Stock Buybacks, Stock Splits, Turnarounds, Value Investing Tagged: AMR, CVC, FO, FST, GGP, HHC, LORL, MOT, MSG, MT, NOC

The Haynesville Shale: Major Opportunity & Risk (CHK, ECA, HK, EOG, XOM, DVN, XCO, FST, PXP, EP, COG, SM, GDP, CRK, CLR, DCP, KMP, ETP)

Administrator — Tue, 23 Nov 2010 13:53:47 +0000

US shale gas deposits were known to have existed for decades. The problem was how to turn them into flowing wells. The natural gas was tightly compressed into small pockets in virtually impermeable rock. In the late 1990s, a small company called Mitchell Energy figured out how to fracture the rock and get the gas flowing. That happened in the Dallas-Fort Worth area in a gas deposit known as the Barnett shale.

Another deposit off to the northeast was known as the Haynesville shale, most of which is located in northwestern Louisiana with related deposits into southwestern Arkansas and east Texas. As exploration developed in the Haynesville shale, the estimated size of the resource was calculated at more than 250 trillion cubic feet of natural gas. That’s more than enough to supply the entire US consumption of natural gas for 10 years at current rates. The Haynesville shale is believed to be the largest natural gas reservoir in North America.

Drilling began in the Haynesville shale in about 2008 and the area is now dotted with wells drilled by more than two dozen companies. The following list names the 15 largest publicly traded companies by their net acreage holdings in the Haynesville shale as reported on their 2009 annual reports. Net acreage is equal to wholly-owned leases plus participation shares in jointly held leases.

Chesapeake Energy Corp. (NYSE: CHK) – 514,425 net acres
EnCana Corp. (NYSE: ECA) – 429,000 net acres
EOG Resources, Inc. (NYSE: EOG) – approximately 370,000 net acres
Petrohawk Energy Corp. (NYSE: HK) – 360,000 net acres
Forest Oil Corp. (NYSE: FST) – 250,098 net acres
Exxon Mobil Corp. (NYSE: XOM) – 166,000 net acres
EXCO Resources Inc. (NYSE: XCO) – 155,945 net acres
Plains Exploration & Production Co. (NYSE: PXP) – 111,000 net acres
Goodrich Petroleum Corp. (NYSE: GDP) – 84,859 net acres
Comstock Resources Inc. (NYSE: CRK) – 72,638 net acres
St. Mary Land & Exploration Co. (NYSE: SM) – approximately 41,000 acres
El Paso Corp. (NYSE: EP) – approximately 40,000 net acres
Continental Resources Inc. (NYSE: CLR) – 24,200 net acres
Cabot Oil & Gas Corp. (NYSE: COG) – 5,852 net acres

Plains also owns 20% of Chesapeake’s interest in the Haynesville shale. Exxon got its share of the play with its purchase last year of XTO Energy.

Three pipeline companies also have extensive operations in the Haynesville play. Kinder Morgan Energy Partners, L.P. (NYSE: KMP) owns a 50% share of a joint venture with PetroHawk, which owns and operates a pipeline and gathering system that will handle more than 800 million cubic feet/day by the end of 2010. Energy Transfer Partners L.P. (NYSE: ETP) is completing the Tiger Pipeline, a 175-mile, 42-inch interstate pipeline that will interconnect with other interstate pipelines to haul the gas to the east and northeast US. DCP Midstream Partners LP (NYSE: DPM) owns and operates some 4,660 miles of gathering and transport pipeline in the Haynesville play.

Oil field services companies also participate by providing the high pressure pumping systems and fluids that break up the shales and allow the gas to flow to the surface. Halliburton Co. (NYSE: HAL), Schlumberger Ltd. (NYSE: SLB), and Baker Hughes Inc. (NYSE: BHI) are among the players here.

The fracturing techniques and the fluids used to force the cracking have come under some scrutiny. The services companies have long held that their fluid formulas are proprietary, and they have refused to give up the exact formulas for the fluids. Some localities and environmental groups are trying to force the companies to release the formulas in order to determine if the chemicals are making their way into local drinking water supplies.

General Electric Co. (NYSE: GE) has recently introduced a new mobile fracking solution in what appears to be a giant opportunity in what the company called “energy efficient, fully transportable, cost effective and that it will enable onsite frac water recycling.”

Haynesville and other natural gas regions have been highlighted in many documentaries and many articles of late. Some are favorable, some are very critical. T. Boone Pickens and others are also touting natural gas as the bridge fuel that can get America off of foreign energy dependence. This is work in progress with an unfinished outcome. There are billions upon billions of dollars at stake.

Paul Ausick

Filed under: Commodities, Oil & Gas Tagged: CHK, CLR, COG, CRK, DCP, DVN, ECA, EOG, EP, ETP, FST, GDP, GE, HK, KMP, PXP, SM, XCO, XOM

Drilling Onshore, Less Risky for Investors (BP, RIG, XOM, CVX, COP, OXY, DVN, APA, SU, FST, NFX)

Administrator — Tue, 11 May 2010 16:54:59 +0000

The continuing disaster in the Gulf of Mexico has called into question drilling safety practices for oil in the ultra-deepwaters of the world. Drilling in a well in water more than 5,000 feet deep lies at the very cutting edge of technology. Drilling costs are high and the risks are substantial, both in terms of potential payoff and potential disaster.

The amount of spillage caused by offshore platforms in 2007 totaled 109 barrels in a total of 18 different incidents. The Deepwater Horizon, owned by Transocean Ltd. (NYSE:RIG) and under contract to BP plc (NYSE:BP), is estimated to be pumping crude into the Gulf at the rate of 5,000 b/d. Unless the flow is staunched soon, this incident will surpass the blow-out offshore of Santa Barbara, California, in 1969, which pumped more than 100,000 barrels into the water.

The oil industry has gotten better at preventing and stopping leaks, but a disaster of the kind that BP is battling now is unprecedented. Trying to stop the leaks is essentially a trial-and-error process that is based on experience gained at shallower depths plugging far smaller leaks. The 1979 blow-out of the Ixtoc 1 Gulf platform operated by Mexico’s Pemex pumped about 3.3 million barrels of oil into the Gulf at a rate estimated at 10,000-30,000 b/d.

This photo shows the oil slick and the Ixtoc 1 platform.

Every US major oil company owns rights to drill in the Gulf of Mexico and in other major offshore fields around the world. Exxon Mobil Corp. (NYSE:XOM), Chevron Corp. (NYSE:CVX), and ConocoPhillips Corp. (NYSE:COP) all have large investments in the Gulf of Mexico and continue to seek new leases as they become available. And while drilling in the Gulf is safer than it’s ever been, the risk of a disaster like the Deepwater Horizon blowout is always present.

But what about companies that don’t drill offshore? Are they safer for workers and the environment and for investment?

The largest publicly traded US company that holds no exposure to offshore drilling in the Gulf of Mexico is Occidental Petroleum Corp. (NYSE:OXY). Oxy Pete, as it’s called, owns and operates leases in North and South America and the Middle East and North Africa. The company does some offshore development in Qatar and Libya in cooperation with national oil companies, but all work in the Americas is onshore. Oxy’s market cap is about $65.5 billion and its forward PE ratio is 10.97, significantly under its current trailing PE of 18.97.

Another large US company that is actively divesting its Gulf of Mexico assets is Devon Energy Corp. (NYSE:DVN). Devon has sold assets to Apache Corp. (NYSE:APA) and others as it has essentially sold off all its deepwater Gulf and international assets to re-focus on developing its onshore properties. As the company chairman/CEO put it recently, Devon is positioned “to deliver low-risk, profitable, organic production growth on a sustainable basis.” Devon’s market cap is about $30 billion, and its forward PE is 10.40, very close to its current trailing PE of 11.02.

A third company with limited offshore work is Suncor Energy Inc. (NYSE:SU). Suncor is based in Canada and holds more than 23 billion barrels of reserves in the Canadian oil sands of Alberta. The company does hold about 4 billion barrels of reserves of the northeastern coast of Canada, but these are not in deepwater and they have been producing for many years in most cases. Suncor’s market cap is about $50 billion, its forward PE is 11.54, and its current trailing PE is 22.11.

A smaller cap company with no exposure to offshore risk is Forest Oil Corp. (NYSE:FST). In many ways, Forest executed the strategy now being followed by Devon, divesting itself of its Gulf of Mexico and Alaska assets to become solely an onshore producer. Forest Oil has a market cap of about $3 billion, a forward PE ratio of 11.27, and a current trailing PE ratio of 7.98.

Finally, an interesting mid-cap E&P company is Newfield Exploration Co. (NYSE:NFX), which expects to get 11% of its total 2010 from the Gulf of Mexico. About 5% of the company’s total reserves are in the Gulf, and Newfield focuses on deepwater plays. The company expects to drill 3-5 new wells a year for several years and to grow its Gulf production by 60% during 2010, mainly through two new wells that are coming on-line later this year. Newfield, unlike Devon and Forest, is not only staying in the Gulf, but is looking to expand its deepwater development. Newfield’s market cap is $7.35 billion, its forward PE ratio is 11.22, and its trailing PE is 18.19.

Most offshore spills are relatively small and most are the result of some issue with transportation, either by tanker or pipeline. A disaster like the one facing BP now is potentially catastrophic because the leak can continue unabated for months until the flow is stopped. The 1979 Ixtoc 1 blow-out took nearly a year to cap.

According to the American Petroleum Institute, there have been 17 blow-outs in US waters since 1964, all but one (Santa Barbara) in the Gulf of Mexico. About 149,000 barrels spilled into the Gulf as a result of those 16 blow-outs. Since 1969, the total amount of oil spillage into the Gulf from platforms is about 176,000 barrels. The API estimates that between 560,000 and 1.4 million barrels of oil enter the Gulf every year through natural seeps.

Oil production in the deep waters of the Gulf is a high-risk, high-reward business. Only the largest companies can afford to take those risks, and that’s probably a good thing. BP is better positioned than all but a small handful of other companies both to try stopping the flow from the Macondo well and to pay for all the clean-up work that needs to be done.

That’s not to say that Devon and the others are avoiding offshore drilling because they’re scared of the consequences. But it’s possible to make a nice profit with minimum risk, and keep your feet dry at the same time. Many feel that the price of crude will only continue to rise, so working where it’s reasonably safe and dry will turn up good profits over time without having to lose sleep over an offshore disaster. It’s almost like taking a value investing approach to exploration & production.

Paul Ausick

Sponsor: 5 best investments for 2010 – The next nine months represent a bold new era for investors.

Filed under: Commodities, Oil & Gas, Value Investing Tagged: APA, BP, COP, CVX, DVN, FST, NFX, OXY, RIG, SU, XOM

Top Analyst Downgrades (ARLP, BJS, CHKP, EP, FST, INFY, ISRG, STAR)

247wallst — Tue, 28 Apr 2009 11:44:37 +0000

These are some of the top pre-market analyst downgrades and negative research calls from Wall Street we have seen early this Tuesday morning:

Alliance Resource (ARLP) Cut to Market Perform at Wachovia.
BJ Services (BJS) Cut to Underweight at JPMorgan.
Checkpoint Software (CHKP) Cut to Hold at Deutsche Bank.
El Paso (EP) Cut to Market Perform at Wachovia.
Forest Oil (FST) Cut to Hold at Jefferies.
Infosys Tech (INFY) Cut to Hold at Societe Generale.
Intuitive Surgical (ISRG) Cut to Market Perfoirm at JMP Securities.
Starent Networks (STAR) Cut to Hold at Cantor Fitzgerald.

JON C. OGG

Posted in Analyst Calls Tagged: ARLP, BJS, CHKP, EP, FST, INFY, ISRG, STAR