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Southwestern Energy

SWN : NYSE : US$39.03
BUY 
Target: US$51.00

COMPANY DESCRIPTION:
Southwestern Energy is a natural gas focused E&P company with operations in the Fayetteville Shale of Arkansas and the Marcellus Shale of Pennsylvania.
All amounts in US$ unless otherwise noted

Energy — Oil and Gas, Exploration and Production
CAPEX & PRODUCTION GUIDANCE SUGGEST SOLID ’14
Investment recommendation
We reiterate our BUY rating on SWN in light of its expanded 2014 capex
and production guidance released last night. The company announced a
$2.3B capital budget, up from 2013 and in line with our estimate. We
reckon that the company’s 14% growth guidance is conservative given
the level of capex. We believe another solid year is in store for SWN.
Key points
 We maintain 17% production growth in 2014: SWN’s 14%
production guidance is a fine starting point in our view, but given its
historically strong productivity performances in its key plays – the
Fayetteville and Marcellus – we see no reason to change our 17%
growth outlook for next year.
 SWN should remain one of the lowest cost U.S. gas producers: Cost
guidance was essentially flat versus 2013 and in line with our model
suggesting SWN will remain one of the lowest cost producers of
natural gas in the U.S. All-in costs should be $2.36/Mcf in 2014.
 14 vertical wells planned for LSBD; 3x 2013′s effort: This provides
added encouragement to us that SWN sees commerciality is at
hand. The company just drilled four “corner-post” wells on the 120k
acres it deems prime and in Q3/13 announced its first commercial
well with an 700 MBoe EUR. SWN’s step-up in drilling says to us it
sees substantial upside to NAV ahead. We see 150 MMBoe or $3.0B
($8.50/share) over the next few years.
Valuation
We value SWN using a discounted NAV and a multiple of EV/EBITDA. By applying a 20% discount to our $65 NAV and averaging that with an 8.0x EV/EBITDA multiple on 2014E EBITDA of $2.4B, we arrive at our $51 price target.

Laredo Petroleum Holdings

LPI : NYSE : US$29.56
BUY 
Target: US$43.00 

COMPANY DESCRIPTION:
Laredo Petroleum Holdings is a Tulsa, OK-headquartered E&P with core producing assets in the Midland Basin. From 4k net acres in 2008, the company now has interest in 200k net Midland acres. As of YE2012, Laredo has 189mmboe of proved reserves, of which 40% is classified as PDP. 52% of proved reserves are liquids (two-stream).
All amounts in US$ unless otherwise noted.

Development and production growth is a priority
In LPI’s first NDR post-Q3 earnings, Mr. Jay Still (COO) and Mr. Ron Hagood (IR) spent a few days on the road with us. A constant recurring theme from LPI was production growth through drilling. With one rig out of six dedicated to delineation in 2014, NAV growth through addition of inventory and derisking of acreage is important to the company, but effective use of capital to grow production and generate cash flows is the near-term priority. In addition, with substantial science and data behind their plan, and the lateral stacked pilot and down-spacing complete, LPI can meet its prod growth rate of 30-35% (Fig 1), as much as any Permian peer.
NAV acceleration and uplift will go hand in hand
While acceleration of drilling plan by adding 2 rigs/year from ‘15 onwards will advance NAV, derisking acreage both laterally (Wolfcamp in N Glasscock) and vertically (Lower Spraberry well in Glasscock) will increase the NAV notably. During its Analyst Day, LPI mentioned it has currently derisked only 52% of Wolfcamp and none of Spraberry (Fig 2).
Sweet spot for Wolfcamp / Cline
In a series of meetings, Jay explained the Basin geology, Wolfcamp / Cline depositional axis, and the movement of the axis with time. In our understanding, LPI has some of the best acreage for deeper zones of Wolfcamp, Cline, and ABW. We note the impressive Cline (Wolfcamp D) rates published by PXD recently, but these are 24-hour rates and, as seen below (Fig 4), on a 30-day basis, LPI still holds the best wells.
Other key highlights of the trip were: 1) ‘14 guidance will be provided in December; 2) two stacked 10,000ft laterals in Upper Wolfcamp and Cline will be drilled shortly; 3) Warburg is flexible in its ownership structure; and finally 4) LPI will be active on bolt-on acquisitions around its acreage. Overall, LPI is a company with strong production growth and a substantial NAV upside. This is our top S/MID-cap Midland Basin pick. We raise price target to $43 primarily on drilling acceleration. Reiterate BUY.

Build Your Portfolio On A Solid Foundation : All You Need To Succeed – in 500 pages of Investing Strategy and Selections


Stock Market Magic: Building Your Apprentice Millionaire Portfolio 2012: All you need to succeed in today's stock market

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Stock Market Magic:

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 All you need to succeed in today’s stock market [Paperback]

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All You Need To Succeed – in 500 pages of Investing Strategy and Selections


Stock Market Magic: Building Your Apprentice Millionaire Portfolio 2012: All you need to succeed in today's stock market

Available at http://www.amazon.com

Stock Market Magic:

Building Your Apprentice

Millionaire Portfolio

 

 All you need to succeed in today’s stock market [Paperback]

Jack A. Bass (Author)

5.0 out of 5 stars  See all reviews (2 customer reviews) | Like 1678

Price: $28.95 & this item ships for FREE with Super Saver Shipping

Oil and Gas Top Picks

Canyon Services Group (FRC-TSX) Cost base of $10.24/share, last purchase on May 8, 2013 at $9.93/share
o Canyon is the fourth-largest pressure pumper in Canada and plays a central role in the development of unconventional reservoirs in Western Canada. Mason believes that current softness in the industry has stabilized and that its high quality fleet and pristine balance sheet should see the company well positioned to capitalize on accelerating Montney and Duvernay development by super-majors.

Bankers Petroleum (BNK-TSX) Cost base of $4.01/share, last purchase on June 3, 2013 at $2.88/share.
o Bankers is a Calgary based oil & gas company with development and exploration assets in Albania. The company currently produces a little over 18,000 b/d of heavy oil for both the Albanian and export markets. Mason believes that with its large development asset base and growing heavy oil demand globally, Bankers is in an excellent position to continue to grow production and cash flow on a per share basis.
Bellatrix Exploration (BXE-TSX) Cost base of $4.47/share, last purchase on May 15, 2013 at $5.72/share
o Mason likes Bellatrix as an organic growth story with a very reasonable valuation and the returns from its core plays are among the most attractive in the basin. The company has to date provided best-in-class drilling results in its plays. Bellatrix has also been very active in seeking joint-venture partners in order to accelerate the realization of shareholder value from its asset base.

NGas

Name: Encana
Symbol: ECA-tsx
Price: $18.13 (23July13)
Comment: Pays a very nice 4.5% yield at this price.
Name: Peyto Exploration
Symbol: PEY-tsx
Price: $28.60 (23July13)
Comment: “Best in Class” Mason Granger, “Can function if ngas prices go as low as $2.”

All You Need To Succeed – in 500 pages of Investing Strategy and Selections


Stock Market Magic: Building Your Apprentice Millionaire Portfolio 2012: All you need to succeed in today's stock market

Available at http://www.amazon.com

Stock Market Magic: Building Your Apprentice Millionaire Portfolio 2012: All you need to succeed in today’s stock market [Paperback]

Jack A. Bass (Author)

5.0 out of 5 stars  See all reviews (2 customer reviews) | Like 1678

Price: $28.95 & this item ships for FREE with Super Saver Shipping

North Dakota : Bakken Makin ‘ Hotspot

English: An Oil Pump in western North Dakota

English: An Oil Pump in western North Dakota (Photo credit: Wikipedia)

By George Leong, B.Comm. for Profit Confidential

When it comes to petro-dollars, North Dakota isn’t the first place you might think of—but soon it will be. The aggressive efforts to develop shale oil have turned North Dakota into one of the top states for growth and employment nationwide.

Since oil first started to be processed from shale formations, the development has been rapid. And today, the amount of oil produced from shale via the fracking technique (the breaking of shale formation using a water, sand, and chemical mixture to access the commodity below) has intensified.

In fact, if you add the proposed oil from Canada’s oil sands, the U.S. will become much less dependent on oil from the volatile Middle East. Texas oil magnate T. Boone Pickens is probably giddily thinking of the investment opportunities, as he has long been an opponent of oil from the Organization of the Petroleum Exporting Countries (OPEC), the largely Middle Eastern oil cartel.

A clear indication of the impact of shale oil can be seen in the monthly report from OPEC. According to the report, OPEC predicts a decline in its market share due to the influx of shale oil (Source: Lawler, A., “OPEC to lose market share to shale oil in 2014,” Reuters, July 10, 2013.)

The growth of shale oil will likely only quicken as new sites are developed and related technology improves. In fact, after Texas, North Dakota is the next biggest producer of oil nationwide—accounting for roughly 10% of the U.S.’s current daily production. (Source: Austin, S., “North Dakota Oil Boom,” Oil-Price.net, August 13, 2012, last accessed July 11, 2013.)

And while there are numerous players in the production of shale oil, one of the key ones in North Dakota’s Bakken oil fields is Continental Resources, Inc. (NYSE/CLR). The company controls nearly one million net acres in the region.

 

In the first quarter, Continental Resources reported net production of about 121,500 barrels oil equivalent (BOE) daily, which included 76,900 BOE from its Bakken shale play in North Dakota and Montana. And the projections are extremely bullish, as the company has targeted a whopping 603,000 BOE for its North Dakota wells, along with 430,000 BOE for its wells in Montana. (Source: “Continental Resources Reports First Quarter 2013 Results,” Yahoo! Finance, May 8, 2013, last accessed July 11, 2013.)

If these numbers pan out, it would become one of the world’s top oil-producing areas, accounting for around 3.3% of OPEC’s current total daily production.

Another key player in the Bakken region is Whiting Petroleum Corporation (NYSE/WLL), with close to 600,000 net acres in North Dakota.

So while OPEC will continue to dominate the global oil market, the state of North Dakota is becoming the biggest big-oil sensation in North America since the tar sands in Alberta. That’s bad news for OPEC, but good news for investors.

 

 

 

Matador Resources

MTDR

NYSE : US$11.89 BUY 
Target: US$13.00

COMPANY DESCRIPTION:
Matador Resources is a Dallas, Texas-based E&P with core producing assets in the Eagle Ford and Haynesville.
Founded in July 2003 by its current CEO, Joseph Foran, MTDR went public in Feb 2012 with ~13.3mm outstanding shares priced at $12.
All amounts in US$ unless otherwise noted.

RESULT EXPECTED ON 2Q CALL


Strong production from Eagle Ford to continue in 2Q We had the opportunity to meet Matador Resources in its office this week and, following our discussions, we expect the company to report strong production this quarter. As announced earlier, MTDR completed seven operated wells in the Eagle Ford including three in DeWitt County and four in LaSalle County. All seven wells seem to have performed at or  above expectations. Included in the four wells in LaSalle County is a 40- acre pilot test that is currently flowing, with results expected on the 2Q call. It might be recalled that LaSalle acreage is Tier 1 (>20% IRR) and we have modeled locations on an 80-acre spacing in our base-case NAV.
Notably, MTDR has implemented several operational procedures – increasing frac stages, decreasing cluster spacing, increasing frac fluid –that have generated strong IPs. Further, putting wells on artificial lift  has helped shut-in wells recover prior production levels. Since impacts of operational procedures are long dated, we believe MTDR will continue to improve resource quality and maximize asset potential.
Permian exploration in progress, results expected in 3Q In 2Q13, MTDR moved a rig from the Eagle Ford to the Permian to drill  and test a three-well program. MTDR has completed its first well and is now drilling a second well in Lea County (Delaware Basin). MTDR had initially planned to move the rig back to Eagle Ford at the end of 2Q; that then got extended to September. Probably due to encouraging data, management is considering keeping the rig in Permian while employing a second rig in Eagle Ford. In our view, Delaware Basin might open up a new fairway for MTDR and along with Eagle Ford downspacing, addressing one of the key concerns: drilling inventory.

Halcon Resources

Rectangular joints in siltstone and black shal...

Rectangular joints in siltstone and black shale within the Utica Shale (Ordovician) near Fort Plain, New York. (Photo credit: Wikipedia)

HK : NYSE : US$5.34
BUY 
Target: US$8.50

COMPANY DESCRIPTION:
Halcon Resources is an independent energy company engaged in the acquisition, production, exploration and development of onshore oil and natural gas properties in the United States. The company has oil and natural gas reserves located in several key areas including the Bakken,  Woodbine/Eagle Ford, Utica, Midway/Navarro, Wilcox, Mississippi Lime and Tuscaloosa Marine.

PREFERRED OFFERING REMOVES FUNDING OVERHANG
Investment recommendation
HK has built positions in some of the most exciting liquids-rich resource plays in the US, including the Utica Shale and Williston Basin (WB). A new Eagle Ford (EF) play called El Halcon was also recently unveiled, and the Wilcox has been moved to the forefront. We believe HK is well positioned to rapidly grow production and cash flow, which we believe in turn should be a catalyst for a higher stock price.
Investment highlights
 HK announced Thursday it priced a $300M public offering of 5.75% Series A Cumulative Perpetual Convertible Preferred Stock. The conversion price is ~$6.16, resulting in an additional ~48.7M diluted shares. The underwriters have an over-allotment option for an additional $45M. The company expects to use the estimated net proceeds of $291M to pay down a portion of its revolver, which had $591M drawn on its $850M borrowing base as of June 7.
 We are lowering our 2013 and 2014 EPS/CFPS estimates due to an increased share count and the addition of preferred dividends. Our 2013E numbers to go $0.31/$1.39 from $0.35/$1.47 and 2014E goes to $0.63/$2.30 from $0.72/$2.52.
Valuation
Our new $8.50 price target represents a ~20% discount to a $10.55 NAV (down from a $9 price target and $11.25 NAV with the same discount

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