Month: March 2014

By Chris Vermeulen – www.TheGoldAndOilGuy.com

Gold and gold stocks have be stabilizing for months and have been quietly rising. Many gold stocks are up 30% even 50% in the past three months. The $HUI AMEX Gold Bugs Index is up over 30% from the lows.

If you think you have missed most of the move already you are wrong. The truth is most of the biggest rallies in stocks take place after a basing pattern with 30 -50% or more has formed. This is signaling massive accumulation in gold stocks and its happening right now by the institutions.

So in this exclusive report I want to share one golden rocket stock pick which I feel has huge upside potential “IF” the precious metals market and miners can breakout of this stage 1 pattern it has formed.

One thing that excites me is about precious metals and gold stocks is the fact that we have heard nothing about gold, silver or mining stocks in the media for months… almost like the big institutions have told the media to avoid putting the spot light on it until they accumulate all they can in terms of physical bullion and stock shares.

This is the same for a few other sectors I have been watching build massive stage 1 bases in over the past few months and will be investing and actively trading them also once they break out of the basing stage.

Gold Stock Trading & Investing Success Formula

1. KISS – Keep It Simple Stupid! – Non one likes or follows complicated trading strategies

2. Understand and know how to identify the four market stages – Read My Book: Click Here

3. Know why and how stages must be traded for timing your entry, profit taking and exits.

4. Scan the market for the top performing sectors and focus on stocks/ETFs within those sectors.

5. Review all stocks and funds to meet setup criteria and trade only the best looking charts primed to start a new bull market (low overhead resistance nearby, strong relative strength, strong volume on breakout, 30 week SMA moving up etc..) Get this done for you: Click Here

6. Sit back, watch and monitor position for possible change in the stage, to adjust stops and identify profit taking levels.

Golden Rock Stock Pick

The chart below is top quality gold stock which has all the characteristics of a big winner. Just to be clear, I normally do not mention individual stocks within public reports. I am not compensated in any way to post this report. This is nothing more than my technical outlook on a stock and not investment advice. I do plan on buying some shares of this company this week or next.

Golden Rocket Conclusion:

While it still my be a little early for precious metals to bottom, it looks as though the stage (pardon the pun) has been set for a precious metals bull market to start. As they say, there is always a bull market somewhere… the key is finding it and taking the proper action.

If you want simple, hassle free trading and investing join my newsletter today.

Chris Vermeulen – www.TheGoldAndOilGuy.com

By WallStreetDaily.com

Last Saturday, I stuck my neck on the block by arguing for a BlackBerry (BBRY) turnaround.

I know… it’s the ultimate contrarian call. But hear me out.

I mentioned that four pillars hold the key to rebuilding BlackBerry.

And I already covered the first pillar – automotive infotainment. This involved QNX – the software “microkernel” company that BlackBerry acquired, which is helping Apple (AAPL) embed its CarPlay system into roughly half of its auto manufacturer partnerships.

Let’s dive into the final pillars today…

~ Pillar #2: Hardware

While smartphones once made BlackBerry a dominant mobile force, they’ve since bled the company dry for years.

But in December – just one month after becoming BlackBerry’s new CEO – John Chen struck a deal with Foxconn (Taiwan: 2354) to help stem the $1 billion in quarterly losses from unsold devices – mainly from the Z10, which bombed in the United States.

The partnership signals BlackBerry’s new strategy. Before, it kept trying to play catch-up in an overcrowded U.S. market – and kept getting crushed.

But it’s now taking a different approach, by focusing much of its hardware business in emerging markets.

Starting in the next quarter, Foxconn will launch its version of the BlackBerry – the Z3 – for $200.

Indonesia – the world’s fourth-most populous country and one of the most underserved mobile markets – will be a prime target. So BlackBerry could actually get a jump on its competition.

Importantly, the partnership also gives BlackBerry an opportunity to obtain materials at more favorable costs, reduce fixed costs and minimize inventory risk.

Chen expects the Foxconn deal to make BlackBerry’s hardware division cash-flow positive by February 2016.

Pillar #3: BlackBerry Messenger

BBM is a mainstay of BlackBerry’s hardware. But it has much more value to the company.

For starters, it’s one of the world’s most secure messaging services.

And with spying and data breaches becoming more common, people are demanding better security for their digital data and communications.

BlackBerry is obliging.

In 2009, it paid $106 million for encryption firm, Certicom, in an effort to expand its security.

Thanks to that deal, BlackBerry now has 130 encryption patents that use the most advanced encryption technology – Elliptic Curve Cryptography. Currently, the only other business using Elliptic Curve is the U.S. government.

BBM is now embedded in Windows and Nokia X phones, and is available as an app on other phones, including the iPhone. BBM now has over 300 million subscribers, with 100 million new users every four months.

With Facebook’s (FB) recent $19-billion purchase of WhatsApp and Japanese e-commerce firm Rakuten’s (Japan: 4755) $900-million buyout of Viber Media (another messaging app), this is a hot field. And with BBM, Chen holds a key bargaining chip.

Pillar #4: Enterprise

BlackBerry is the only company with the authority to operate on U.S. Department of Defense networks. The Pentagon recently announced that BlackBerry phones account for 98% of devices in a program aimed at bringing greater mobile access to DoD staff.

This exemplifies BlackBerry’s renewed focus on enterprise sales.

Indeed, the firm is set to launch its new BlackBerry Enterprise Service (BES) platform, BES12, which will breed new enterprise applications for BlackBerry smartphones and other mobile devices.

Companies like Daimler (DDAIF) and Airbus Group (EADSY) are among the customers that have adopted BlackBerry’s older Enterprise Service 10 model. So with a more advanced version in the pipeline, we should see more high-profile clientele upgrade to BlackBerry Enterprise, too.

Since government and business clients have traditionally favored BlackBerry, offering an ecosystem on par with Apple’s App Store would make BlackBerry relevant in the enterprise world again.

Two Ways to Profit From BBRY

BlackBerry reports its earnings on March 28.

Most people trading the stock are playing the short-term news.

That’s what you should do, too.

Since the company’s recovery plan is just starting, we’ll likely see another rough quarter – which will knock down the share price. You could consider playing any potential downside by purchasing the March 2014 $8 put options.

Otherwise, wait for a pullback below $8 to go long on the stock.

Remember… BlackBerry is a speculative play.

However, Chen’s sharp focus has already generated more optimism – BlackBerry shares are up 43% since he took over.

Short sellers are dwindling, too. Short interest in BlackBerry has dropped to 17% from a peak of 33% in 2013. That means there are roughly 100 million fewer shares short weighing down the price.

Conventional wisdom says BlackBerry is already dead. But the company still has time to act strategically, rather than panic.

With $3 billion in cash, the company has a decent cushion until Q4 2015, when Chen foresees BlackBerry as cash-flow positive. Plus, by November of 2014, some of BlackBerry’s intellectual property expenses on third-party patent royalties will expire, wiping out roughly $800 million in fixed costs.

If the business stabilizes, BlackBerry could even become a realistic takeover target.

I believe there’s potential here. And so does major hedge fund manager, Dan Loeb. A few months ago, he revealed that his Third Point fund has a $10-million stake in BlackBerry.

I’m intrigued to see how this plays out.

Your eyes in the Pipeline,

Marty Biancuzzo

The post My Boldest Call Ever appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: My Boldest Call Ever

USDCHF: With the pair extending its weakness the past week, further downside is expected in the new week. However, it may begin to look for corrective recovery since the mentioned weakness is overextended. On the other hand, support comes in at the 0,8698 level with a break and hold below here resuming its medium term downtrend towards the 0.8650 level. Further down, support is located at the 0.8600 level and then the 0.8568 level and then the 0.8500 level. On the upside, resistance resides at the 0.8804 level. Further out, resistance resides at the 0.8895 level where a break will clear the way for a run at the 0.8950 level. On a break of here, resistance stands at the 0.9050/81 levels followed by the 0.9100 level. All in all, the pair remains biased to the downside medium term but faces recovery risk.

Article by www.fxtechstrategy.com

By CentralBankNews.info
    Pakistan’s central bank maintained its policy rate at 10.0 percent and said almost all major economic indicators had strengthened in recent months, improving the outlook for inflation to remain within single digits in the current 2014 fiscal year.
    The State Bank of Pakistan (SBP), which raised its rate by 100 basis points in 2013, on March 1 forecast inflation in fiscal 2014, which began on July 1, between 10 and 11 percent
    Pakistan’s inflation rate was practically unchanged at 7.93 percent in February from January’s 7.91 percent but down from 9.18 percent in December and 10.9 percent in November, a 2013 high. Inflation last year was affected by a rise in the general sales tax, the imposition of value-added-tax on some manufactured goods and the adjustment of electricity tariffs.
    The larger-than-expected decline in consumer prices in the last two months has positively impacted market sentiment and was broadly in line with the SBP’s view that a pickup in economic activity reflected improved utilization of idle productive capacity rather than higher demand.
    “In other words, growth of 6.8 percent in the LSM sector (Large Scale Manufacturing) is an indicator of aggregate supply, which bodes well for containing inflation,” an upbeat SBP said.

    In addition to growth in manufacturing, the SBP said the fiscal deficit had been contained in the first half of the 2014 fiscal year, private sector credit has increased, the Pakistani rupee had appreciated and foreign reserves, a key concern of the bank for some time, have increased noticeably.
    “All-in-all confidence in the economy to rebound seems to have increased,” the SBP said.
    In the third calendar quarter of 2013, Pakistan’s Gross Domestic Product expanded by an annual 5.0 percent, up from 3.59 percent in the second quarter.
    In its latest quarterly report, the SBP forecast economic growth of 3-4 percent for fiscal 2013/14, below the government’s target of 4.4 percent but higher than the International Monetary Fund’s February forecast of 3.1 percent. In 2012/13 the economy grew by 3.6 percent.
    Pakistan’s foreign exchange reserves rose to US$ 4.6 billion by March 7 from $3.2 billion at the end of January but the bank said this was only a beginning as a substantial and consistent accumulation is required. Net capital and financial inflows of $428 million in the July to January period were still considerably below the current account deficit of $2.055 billion in the same period.
    The Pakistani rupee plunged in 2008 and continued to depreciate slowly in the following five years but after hitting 108.5 to the U.S. dollar on Dec. 4, 2013, it has reversed course and strengthened in the last three months, especially during March.
    Earlier today the rupee was trading at 99.31 to the dollar, up 5.3 percent this month alone and 5.7 percent so far this year.
    “These trends, including exchange rate appreciation, have improved the inflation outlook with a higher likelihood of average inflation remaining within single digits for FY14,” the SBP said.

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By MoneyMorning.com.au

The moon-shot idea isn’t new. History is filled with large, impossible thinkers challenging our perceptions about what we can do.

Trying to fly, complex computers, and landing on the moon are all examples of moon-shot thinking.

The idea is to aim for the impossible. Answer a problem that doesn’t exist yet. Rather than make something 10% better…make it ten times better.

You know, achieve the unthinkable.

That’s the thinking behind moon-shot ideas.

An overwhelming amount of technology we use today is because of big thinking.

The key to moon-shots is that someone doesn’t accept impossible. They poke, and prod, and they never take no for answer…

Moon-Shot – Solve For X

This is basically a website dedicated to brilliant ideas.

However this one in particular caught my attention. You see, in my world, I get cranky that my online groceries are delivered ten minutes outside my three hour window. And I get frustrated when it takes another fifteen minutes to get to work because of heavy traffic.

But I forget that my first world problems rely on very simple infrastructure; the humble paved road.

A bit of asphalt is what enables you and me to have what we want moved from one place to another.

However, there are parts of the world where something as simple as a sealed road for moving freight is impossible.

The thing is, many countries with limited road infrastructure have limited means of commerce too.

Look at the chart below:

Source: Solve For X
Click to enlarge

The light areas show a solid road network.

The dark bits show no real paved road connections. As you can see two thirds of the world has almost no paved road network. Not only that, but this is also home to half of the world’s population.

Put another way, this chart shows three billion people only have a limited transport system.

Now let’s look at the next chart:

Source: Lockheed Martin’s Advanced Development
Click to enlarge

This shows the cost efficiencies when it comes to transport relative to speed. That means, how much it costs to ship something.

Shipping is the cheapest and slowest, while truck and train are pricier but a little quicker. And anything by air is clearly the most efficient, but expensive. Which means for developing nations, where good roads are least common, moving goods by air is simply not an option.

Many countries, like Africa and Australia for that matter, rely on trucks and shipping. This is great if you live on the coast. But what about for those who live inland?

This is one of the problems that limit Africa’s commerce for example. Yes, there’s also a bunch of other problems, but today I’m just referring to transport.

Something as simple as getting products from point A to point B is vital to develop an economy. Heck, even Australia faces these conditions. As a result of our sunburnt country, a land of sweeping plains, we have the longest road trains in the world (around 53 metres long) to move stuff from one side of the country to the other.

And we can only achieve this with a very small road network. For many other countries, establishing a road network will never be an option.

So how can these nations access goods without a developed road network?

Well get this. The guys at Skunk Works (which is a think tank for Lockheed Martin’s Advanced Development Program) have come up with an idea. You’re not going to believe this, but they reckon the answer is…giant airships, like the one below:

Click to enlarge

Check out this video for more on the technical details of the design, but the short version is, it has the downward thrust of a helicopter, the propellant and aerodynamics of an aeroplane and buoyancy of a hot air balloon.

The best thing is the cost of transportation is only a little more than road or train freight.
It’s also perfectly suited for remote regions. It can land on snow, water, sand and uneven ground.

And so it doesn’t float away, there are grip pads on the base which anchor it to the ground.

This idea is almost a decade old. It was first tested in 2006. However Skunk Works have fine-tuned it to a more commercial level. They say it can carry 500 tonnes of cargo. That means this airship could carry about three times more than the average cargo plane.

Is this massive airship the answer? I’m not sure. It seems crazy. But plenty of crazy things turn out to be commercially successful. That’s the point of moon-shot ideas. But I do know it could be the way to cut transport costs and connect remote areas to commerce.

The potential success of seemingly outlandish moon-shot ideas is the feature of Sam’s Volkering’s latest report. Check out what he says are the four moon-shot ideas for the new tech age.

Shae Smith+
Editor, Money Weekend

Join Money Morning on Google+

By MoneyMorning.com.au

By WallStreetDaily.com

The concerns outside the United States have crushed signs of progress in the United States. After five weeks, the S&P 500 hits a new low – shooting stocks to their lowest close since early February. Meanwhile, across the ocean from Wall Street, Ukraine and Russia are still in the thick of a crisis. With Russia on the border “ready to invade,” the threat of war is rising for Ukraine, as per its acting president. In sign of support for NATO allies, U.S. F-16 jets landed in Poland only hours later.

So far this year, Russia has kissed $50 billion in capital goodbye, according to Goldman Sachs (GS). By the end of the year – that will snowball into $130 billion (which is double the outflow of last year). The possibility of war is not the only concern – China’s economy is taking a turn for the worst – with a sharp slowdown over the first two months of the year.

Though investors fear what the downfall will mean for the global economy, the U.S. economy is looking brighter. For the first time in three months, retail sales rose – budding slightly of ahead analysts’ forecasts. This report also signals a very good sign after the harsh winter.  What’s better, the unemployment lines are shortening! Last week, weekly job claims hit a new three-month low.

Meanwhile, Stanley Fischer, Federal Reserve Vice Chairman nominee shared a few words with lawmakers on the Fed policy. He confirmed that he backed the policy and it’s ability to strengthen the economy – also vouching that it isn’t out of touch with the realities of Main Street.

Stanley Fischer says, “Anybody who has studied, and particularly studies this crisis, knows the cost of unemployment and understands slow growth is not an abstraction. Slow growth is people not finding jobs. Slow growth is problems for families and meeting their, even their food bill. And if one does not understand that, one cannot seriously think of being a policy maker.”

Elsewhere, shipping costs are eating away at Amazon.com’s profits. Therefore, it’s been forced to add a price hike with its annual membership, Prime – the first hike seen since it launched nine years ago. In exchange for free shipping, the membership jumped a whole $20 – equaling a $99 annual price. Fortunately, investors support the change! It’s shares are skyrocketing, even in a down market.

It seems that a downmarket has crept overseas as well – European stocks fell to five-weeks lows, too. Maybe everyone has the same concerns about Ukraine and China.

The post Ukraine, China Send Wall Street to Five-Week Low appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Ukraine, China Send Wall Street to Five-Week Low

Disappointing Chinese date is weighing heavily on Australian dollar sentiment. New vehicle sales and RBA minutes scheduled for Sunday/Monday respectively. Disappointing data and dovish minutes will compound negative investor sentiment, and could drive the AUD/USD towards January lows. Positive data and hawkish minutes would likely create some short term strength in the AUD/USD, but may not be enough to reverse the longer term downtrend.  Keep in mind the reason the Australian Dollar had such a miserable week is because of the nation’s reliance on China. Roughly 40% of Australian exports go to China. Also being released next week is RBA minutes. A dovish release combined with bearish new vehicle sales would stir up negative sentiment and drive the pair closer to 0.8924.

Written by Daniel Elo, www.EconomicCalendar.com

Article by Investazor.com

Besides all the macroeconomic indicators and central banks’ press conferences or juicy speeches by theirs governors there is something that can affect the markets even more. It is powerful because usually is rather unpredictable and it strikes when you expect the least. Also, you do not know how much is going to last and how destructive can be. You are probably thinking which is the answer and some of you have might even guessed it. Geopolitical conflicts are that kind of force you do not want to witness as an investor because sometimes can even lead to local wars and who knows maybe to the next World War.

I am writing this article in the light of the events which take place at this moment in Crimea and the existing tensions between the Ukraine and Russia on one side and between Russia and the West on the other side. These types of situations are rare, but have an extremely severe impact on the markets, so that’s why I consider it is so important to know the effects that geopolitical conflicts have on the markets and to act quickly. I will take as an example the Crimean conflict and I will emphasize which financial instruments gain from political disorder and which of them are dumped by investors.

Local currencies of the countries which are in conflict will be the ones being affected. The Ukrainian hryvnia and Russian ruble were tumbling to record lows in front of the US dollar before the Central Banks took action and raised the official interest rate. The second victim is the local stock market. The Russian capital market index, RUS50, dropped close to 12% in one day after the tensions escalated very quickly and the United States threatened Russia with economic sanctions.

The post FX Trading In This Geopolitical Turmoil appeared first on investazor.com.

By CentralBankNews.info
    Russia’s central bank maintained its key rate at 7.0 percent, the level it was raised to earlier this month to calm nervous financial markets, and said it does not intend to lower the rate in coming months as the risks of high inflation still remain.
    The Bank of Russia, which hiked its benchmark rate by 150 basis points on March 3 after markets tumbled on fears of an outbreak of war between Ukraine and Russia, said inflation accelerated to 6.4 percent by March 11, up from 6.2 percent in February, partly due to the depreciation of the ruble along with higher prices for vegetables, fruit and dairy products.
    This could boost inflationary expectations and the central bank said its priority was to “contain the effect of exchange rate dynamics on inflation and to maintain financial stability.”
    The central bank, which only last month expected inflation to gradually decline towards its target of 5 percent by the end of the year, said inflation rates are now unlikely to fall until the middle of this year due to the impact of the lower ruble and then decelerate to the target in the “medium term.”

    Russia’s ruble has been weakening since early February last year and in 2013 it fell by over 7 percent against the U.S. dollar.  On March 3 it tumbled 2.5 percent, triggering intervention worth $11.3 billion by the Bank of Russia followed by a further $300 million the day after to support the ruble. This helped control the fall but it has continued to depreciate, trading at 36.66 to the dollar today, down 10 percent since the beginning of the year.
    “High inflation risks that brought about an increase in the key rate on 3 March 2014 still remain,” the bank said. “Unstable external conditions and a rise in financial market volatility are conducive to an increase in economic uncertainty.”
    “Hence, the Bank of Russia does not intend to lower the key rate in the coming months,” it added.
    Investors remain on edge in light of Sunday’s referendum in Crimea on whether it should join Russia and leave Ukraine. If Crimea votes to join Russia, as expected, Western countries may impose economic sanctions, further undermining investors’ confidence in Russian assets.
    Russia’s economy was already slowing before the geopolitical tensions and the central bank said investment and consumption is likely to slow further due to the increased uncertainty and declining confidence, with the result that growth will be lower than expected.
    In its policy report from February the central bank forecast growth this year of 1.5-1.8 percent, down from 1.3 percent estimated for 2013.
    Demand from consumers has been the only real driver of economic growth in recent months as industrial production has been stagnating and investment low. But consumers have started to pull back due to slow growth in wages and deteriorating sentiment, the bank said.
    In the third quarter of last year, Russia’s Gross Domestic Product expanded by only 0.2 percent from the second quarter for annual growth of 1.2 percent.
    The impact on growth from the depreciation of the ruble is seen as limited by the central bank.

    http://ift.tt/1iP0FNb

Source: Peter Byrne of The Energy Report  (3/11/14)

http://www.theenergyreport.com/pub/na/mike-breard-buy-small-for-deep-profits

The Street’s eyes may be on North Dakota, but Mike Breard also keeps an expert eye focused on smaller oil and gas companies drilling elsewhere. In this interview with The Energy Report, the Hodges Capital analyst discusses several companies drilling excellent wells in Texas, Oklahoma and the Gulf of Mexico. Breard, a veteran oil and gas analyst, knows the first names of some of the sharpest managers in the industry. Stick with the winning teams, he advises, even when they change firms.

The Energy Report: How do you choose the energy names in your coverage list?

Mike Breard: I look for managers with great track records. For example, I attended the annual meeting of Matador Resources Co. (MTDR:NYSE), and there were 150 people there. Normally, only maybe 20 people attend the annual meetings of the junior energy companies, but these folks had been investing with the current managers of Matador in private deals for 30 years. They were so eager to get in on the newest venture of these guys that Matador stock has tripled during the past year.

TER: What is driving Matador’s success?

MB: Attention to detail. Matador does not control the most acreage in a play; they want the best acreage. The company studies an area for quite a while before deciding what leases to go after. Then, it does all kinds of additional technical studies on the leasehold before drilling—such as microspectrometry, which is taking pictures of the cores under a strong microscope to identify channels that will allow the oil to flow. It is drilling now in the Eagle Ford and the Delaware Basin portion of the Permian Basin.

Frankly, I do not care for small firms that invest in a dozen different plays all over the country—stretching their assets and manpower too thin. I prefer companies that stay in two or three regions and concentrate on developing the assets on hand.

TER: How is Matador stock doing?

MB: It was under $8.00 last March then hit a high of $24.25 in late November. When the price of oil dropped, the stock went down to $16. Recently it was over $25 and it could go a lot higher as people get used to thinking about oil staying in the high-$90s/low $100s. Matador has a lot of gas in the core area of the Haynesville. As gas prices rise, Matador could drill some profitable wells there too.

TER: How important are factors like debt:equity ratios and other types of metrics when you decide whether or not to invest in a junior energy firm?

MB: In the last few years, those metrics have not been as important. Large investors are just throwing money at the oil business. A company will announce a $500M debt offering and two days later, they sell $750MM. Money is the easiest thing to get in the energy industry right now. Of course, I do look closely at the debt situation, and I want a firm to have enough liquidity to drill wells and make acquisitions. But there are different ways of doing this. Take Comstock Resources Inc. (CRK:NYSE), for instance: it has not sold any new stock in years. It treats its shares as a precious commodity, while some companies do a stock or bond offering every year or two.

TER: Why is money so free right now?

MB: Cash is nearly worthless in terms of getting a return. Investors are seeing the large profits flowing from the Bakken, the Eagle Ford, the Permian, etc. Investors want in on that seemingly easy money. Energy is a growth industry.

TER: What are the top oil and gas plays in the U.S. for 2014?

MB: The Permian Basin is the hottest area right now. Drillers have been active here since the Santa Rita No. 1 well began producing in 1923, and numerous formations are productive. The Bakken, the Eagle Ford, the Marcellus, the Wattenberg, the Mississippi Lime, etc. are all good areas. More drilling is being done in the Utica and the Tuscaloosa Marine Shale, and these areas could blossom in 2014—2015.

One issue to consider, however, is that in some of the older plays, the core areas have been identified and firms are exploring the fringe portions. Now, as far as Wall Street is concerned, the older regions do not have much glamour left. Some hedge funds are insisting on a minimum leasehold of 100,000 acres and 1,000-barrel-a-day (bbl/d) wells or they are not interested. Size is not the only factor though. The reality of it is that if a firm drills a well for $0.5M and produces 50 bbl/d, the well can pay out in a few months, and the rest is pure profit. Those types of small, profitable operations are running well below the radar on The Street—which can make them good buys.

The oil stocks can be volatile, not based on what they are actually doing, but based upon the perceived price of oil and Wall Street’s cyclical fears. In November, many on Wall Street became convinced that the price of oil was going to fall to maybe $60/bbl. Oil stocks dropped substantially—even though the price of oil did not plummet. Now, many of these Wall Street seers are thinking “Oil is $100! We missed out; it is time to start buying!”

TER: What other firms do you like in the junior space?

MB: EPL Oil & Gas Inc. (EPL: NYSE) is now being managed by Gary Hannah, who has been in the business for 30 years. EPL was formerly called Energy Partners Ltd. Gary studied its assets, took over the company and paid off the notes in 2009. He is working in the shallow waters offshore in the Gulf. EPL made a big acquisition several years ago. It spent $15 million ($15M) the first year on technical studies, and $150M the next year on drilling and tripled the reserves. This is its business model. EPL is in the giant shallow water fields that were discovered 40 years ago, when we did not have the advanced seismic technology to properly assess the true potential. Now, EPL is finding all kinds of smaller reserves around these old fields and there is plenty of infrastructure in place. Zones between 12,000 and 20,000 feet have rarely been drilled. EPL has begun a $45M Full Azimuth Nodal seismic program to better understand the deeper water formations.

TER: Is there a lack of competition in the shallow basin area?

MB: There is a lack of interest. People are putting their money into the shale areas onshore and are shying away from the shallow waters. But the Gulf has ample production facilities and pipelines in place, and it really does not cost that much more to drill a shallow water well than it does to drill a Bakken well.

EPL is conducting studies and making acquisitions in this space. In 2012, EPL bought Hilcorp assets for $550M. They spent 2013 studying the prospect and will spend over $100M this year to explore and develop.

TER: How is the EPL share price performing?

MB: EPL’s high was about $43 last fall. When energy stocks generally declined, it dropped down. Then there was a storm in the Gulf that shut down some high producing wells. When EPL tried to bring them back on, it did not get production back as high as it was, which was disappointing. The stock fell to around $25 and has recently been back up over $30.

TER: What other juniors are you focused on?

MB: Comstock Resources Inc. was a big gas producer in the Haynesville when that region was hot. When the gas price fell, Comstock went looking for oil on property that it already owned in the Eagle Ford. It also bought property in the Permian Basin. But when it came time to drill the development wells, gas was at $2 per thousand cubic feet ($2/Mcf). Comstock realized that it could not afford to develop both properties. It sold the Permian Basin properties for $824M, which was a $231M profit in about a year. Then it paid down debt, started to buy back stock and began to pay a dividend, which is very rare for a small producer. The yield is now 2.5%.

Comstock then put $100M into exploring the East Texas Eagle Ford, primarily in Burleson County. It plans to drill 10 wells there this year on 21,000 net acres. It also bought 51,000 net acres in the Tuscaloosa Marine Shale, where the wells cost quite a bit more to drill. Comstock management plans to drill a couple of wells there in 2014, but it is waiting to follow the lead of nearby producers before stepping up drilling in 2015.

TER: Do you buy all these types of stocks on a short-term basis or are you a long-term holder?

MB: We have held some stocks for four or five years. It depends on how they perform. If a stock doubles in a week, we may sell it. If something bad happens, we may also sell it. But, generally, we’re looking for the longer-term plays.

TER: What other picks do you have for us today?

MB: Torchlight Energy Resources Inc. (TRCH:NASDAQ) is a small company with a property in the Eagle Ford that provides cash flow. It plans to sell that asset, if it can get a high enough price, because it is going more into the Hunton play in Central Oklahoma with a private operator, Husky Ventures Inc. Husky has drilled 35—40 wells in the Hunton after spending a lot of money on technical work to find the right spots to drill and has been very successful. Torchlight has four areas of mutual interest with Husky. Torchlight has two other properties in Kansas, where it can drill low-cost, low-risk oil wells. Torchlight is currently drilling in one Kansas play with Ring Energy Inc. (REI:NYSE).

Not too many people have heard of Ring, but it is run by the same managers that built Arena Resources and sold it to SandRidge Energy (SD: NYSE) for $1.6 billion ($1.6B). Arena drilled 850 shallow, low-cost wells with high rates of return in the Central Basin Platform of the Permian Basin. Ring is drilling the same type of wells in the Central Basin, but it also got into a similar shallow oil play in Kasnas. These wells will cost around $0.65M to drill and the payout can come in less than a year.

TER: How is Torchlight financing these activities?

MB: It sold $7M in equity recently. It is also looking at a mezzanine financing package or a line of credit. It has already set aside $6M to gain a half-interest in the Ring Energy play in Kansas and has put up its share for at least two more months of drilling with Husky.

TER: Do you have an interest in international energy sectors?

MB: We buy blue chips, including BP Plc (BP:NYSE; BP:LSE) and Exxon Mobil Corp. (XOM:NYSE). They pay decent dividends.

TER: Do you have any interests in the alternative energy sector?

MB: I have all I can handle with following conventional energy. I have, however, talked with managers at wind turbine companies. They have gas generators on the side to supply electricity when the wind dies down. Ironically, the alternative energy sector has created additional demand for natural gas.

TER: Do you have any other companies that you want to talk about today?

MB: Helmerich & Payne Inc. (HP:NYSE) is a drilling company that was the first to build modern AC rigs that they called FlexRigs. These are not like the old mechanical rigs with the dirty, dangerous drilling floor. In a computerized FlexRig, the operator sits high up in an air-conditioned cockpit guiding the drill bit while looking at computer screens that tell him the weight on the bit, how fast it is turning, etc.

A decade ago, the company’s competitors laughed, claiming that no one was going to pay extra for such a fancy rig. Now, HP has half the AC rig market share. The rigs are super efficient and made for pad drilling. The footage rate has increased by 10% in each of the last two years. While an average rig may drill a well in 30 days, an HP rig can drill it in 18–20. It charges more per day, but it is cheaper per well because the wells are drilled faster.

The company can build its rigs for $1–2M less than the competition and can charge 15% more. This provides a superior profit margin. It has been building two new rigs per month, and is going to three per month in April. And it is well-managed. The Helmerich family has been running the company since it was started in 1920. Hans Helmerich has just stepped down as CEO but he will still chair the board.

TER: Is the stock cheap?

MB: HP stock has been hitting all-time highs lately, and it has raised its dividend quite a bit. It is yielding 2.5%. It has the potential to go higher. Building three new rigs a month should add around $0.90/share on an annual basis.

In general, offshore drilling stocks have been way oversold, and they will likely be good performers later this year.

TER: Thank you very much for your time, Mike.

MB: Cheers.

Mike Breard graduated from Rice University in 1963 and got an MBA from Stanford in 1965. His first job was with Standard & Poor’s in New York. He later worked with Goodbody and Walston in NYC before moving back to Dallas. He worked for several brokerage houses in Dallas, including Eppler, Guerin & Turner and Schneider, Bernet & Hickman, as an energy analyst and institutional salesman before joining Hodges Capital in 1997.

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DISCLOSURE:
1) Peter Byrne conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: Torchlight Energy Resources Inc.
2) The following companies mentioned in the interview are sponsors of The Energy Report: Torchlight Energy Resources. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Mike Breard: I or my family own shares of the following companies mentioned in this interview: CKR, EPL, HP, MTDR, TRCH I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: BP, CKR, HP, MTDR, TRCH, XOM. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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