January 7th Blog

[dan_s]

We had our largest crowd ever today at our luncheon in Houston, over 125 attendees. I was impressed by GreenHunter Water. Gary Evans (CEO) and Jonathan Hoopes (President and COO) make a very good team. The company provides a valuable service in a very important niche.

GreenHunter Energy, Inc. Series C Pfd stock (GRH-PC) looks very interesting to me. The current yield is over 11%. With the company rapidly increasing revenues the risk/reward looks good.

Since December 26, WTI crude oil has held nicely above $90 per barrel, and rallied to $93 per barrel for the first time since September 2012 on the resolution of the fiscal cliff. Technically, it appears to be consolidating and the next move looks to be another leg up.

Despite strong oil prices the energy sector didn't do much in Q4 until it became clear that the Fiscal Cliff nonsense would only result in minor tax changes for E&P companies. Resolution of the Fiscal Cliff, although just a Band-Aid, has caused the entire market to move higher. If investors can gain more confidence in oil prices the sector has a lot of upside potential. Of course it doesn't help that our friends at Raymond James keep holding to their $65/bbl doomsday forecast. I get a lot of forecasts and RJ is definitely the lowest I've seen. Everyone else has Brent over $100/bbl all year and WTI holding $80/bbl. If so, our Sweet 16 is grossly undervalued.

I am assuming $85/bbl and $3.50/mcf in my Fair Value Estimates.

I am very eager to see 4th quarter results and year-end reserve reports.

Tomorrow I will be reviewing profiles (prepared by one of our SMU interns) on HEP and ESV. Both are very well managed and profitable companies.