Sweet 16 Recommended

[dan_s]

Stifel’s Michael Scialla and team argue that investors should play defense with oil & gas stocks like Concho Resources (CXO), Noble Energy (NBL), PDC Energy (PDCE), Parsley Energy (PE), Pioneer Natural Resources (PXD), Synergy Resources (SYRG), and Cimarex Energy (XEC) after the failure of Opec to reach a deal on oil limits in Doha.

Expectations for the global oil market to re-balance in 2H16 have increased to the point of dominating consensus opinion over the past two months as Chinese economic fears have subsided, the pace of Iran’s post-sanction growth has underwhelmed, and a decline in U.S. production has solidified. Even the once bearish IEA has projected the global surplus to shrink to a mere 0.2 MMBls/d in by 3Q16. A re-surging market share battle between Saudi Arabia and Iran, however, casts a veil over the timing of the realignment of supply and demand. The divide between the two countries runs deep and could widen if the Saudis flood an oversupplied market with additional barrels…

E&P Investors Should Stay on Defense We recently downgraded 5 stocks and continue to recommend only stocks of the best financially positioned companies in our E&P group. These include Concho Resources, Noble Energy, PDC Energy, Parsley Energy, Pioneer Natural Resources, Synergy Resources, and Cimarex Energy. The balance sheets of these companies should remain sound even if WTI oil prices fall short of our 2016 forecast of $37. This group also has some of the strongest assets in our universe as measured by half-cycle returns.

Since Stifel get my newsletter and our company profiles, it is not surprising to me that all of their recommendations are in our model portfolios. - Dan

[dan_s]

Analysts at Piper Jaffray unit Simmons & Co. International wrote in a note that while the news out of the weekend was negative, the real fulcrum of the rebalancing in the oil markets is being driven by non-OPEC countries contracting rather than expanding, with 2016 expected to represent the first contraction in non-OPEC production since 2008. "The asymmetry for oil prices is higher rather than lower over the next two years," they noted.

Tudor, Pickering, Holt & Co. thinks it is. It said it would be buying stocks on the oil market weakness with the fundamentals improving recently. It likes Gulfport Energy (GPOR) along with Chevron (CVX) , EOG Resources (EOG) , Concho Resources (CXO) , Rice Energy (RICE) , Baker Hughes (BHI) , Halliburton (HAL) and Schlumberger (SLB)

Jason Wangler, who follows oil and gas stocks at Wunderlich Securities, has a buy rating out on Gulfport along with Pioneer Natural Resources (PXD) , Bill Barrett (BBG) and Callon Petroleum (CPE).

[par_putt]

CPE (Callon) $220 million Midland Acquisition from Big Star
BRIEF-Callon Petroleum Co announces Midland Basin acquisitions
REUTERS 2:42 PM ET 4/19/2016
Symbol Last Price Change
CPE 8.92 +0.19 (+2.18%)
QUOTES AS OF 04:02:03 PM ET 04/19/2016
April 19 (Reuters) - Callon Petroleum Co(CPE) :

* Callon Petroleum Co(CPE) says deal valued at $220 million in cash and approximately 9.3 million shares of Callon common stock

* Callon Petroleum Co(CPE) says Callon Petroleum Company(CPE) announces midland basin acquisitions and establishment of a new core operating area

* Has signed definitive agreements that increase its exposure to an existing core operating area in a separate transaction

* Upon closing of big star transaction, Callon will assume operatorship of over 80 pct of acquired acreage

* Callon Petroleum Co(CPE) says entered into definitive agreements with three private entities to acquire certain assets operated by Big Star Oil And Gas Llc

* Estimates that production from transactions will contribute approximately 2,500 - 3,000 boe/d to full-year 2016 estimates

* Raising 2016 annual production guidance from a previous range of 11,500 - 12,000 boe/d to 14,000 - 15,000 boe/d

* Now expects operational capital expenditures (including facilities) of $95 - $105 million in 2016

* Intends to finance cash purchase price of deals with cash on hand, borrowings under credit facility, proceeds of capital markets deals

[dan_s]

My valuation of CPE is now $11.40 with a lot more upside if oil prices go up.

[Roadster]

Dan

CPE amazing events.......

What do you think are the chances of Gastar doing a equity raise?

BTW Where is the 2017 Cruise????????????

Thanks
Rick

[dan_s]

Rick;
Gastar is focused on the sale of their South Stack acreage. An equity raise with the share price this low is probably not a good idea.
We found out at our luncheon on Monday that Stack is the Real Deal. Even at $40 oil the economics are good in Stack.

We will let you know about EPG Cruise 2017 in a few months. Susan's month is now in hospice and we need to see how that works out. It will definitely be on the RCL Liberty out of Galveston and probably the end of January or first week of February.

[Roadster]

Hi Dan

What are your thoughts on Gastar's Series A and B dividend suspended ? Their balance sheet is so highly levered. 200 million shares outstanding....

Regards
Rick

[dan_s]

I am surprised that they did not suspend preferred stock dividends sooner. I have not recommended GST or their preferred stock for way over a year.

[par_putt]

"I have not recommended GST or their preferred stock for way over a year." said Dan

YES BEWARE , all of the msgs on this page are from 2016 except for the last two.

[dan_s]

Also, note that there is no mention of Gastar in the posts prior to the one that Roadster posted last evening.

I do not like to say bad stuff about any company, so when I drop a company from the newsletter or coverage there is a reason.

That said, I have known Rush Porter for a long time. He is a fighter and if anyone can keep Gastar afloat he can.

This is just me reading between the lines now, but I think he is doing his best to prove up the Oklahoma leasehold so that he can sell it. Most of Gastar's leasehold is outside of the Tier One area, but if oil prices spike he may succeed. He needs some luck and some help from commodity prices.

If you own the preferred stock, just remember that debt comes before preferred stock.