Until the winter demand cycle appears I doubt we will see any material change in oil stocks. It is more of a trading market than an investing market until conditions return to normal.
If you took my suggestion on AHC last week you did well.
AHC - Amerada Hess - good trading stock. Buy under $110 or over $122.
AHC dropped from $121 to my $110 target after earnings and then rallied right back to $122 three days later. Far too quick for the newsletter but a gold mine for traders. Amerada Hess continues to puzzle me. While I like the stock for trading purposes the price action bears no resemblance to reality. AHC missed earnings by a mile, +$2.60 vs analyst estimates of +3.31 but after a nearly $11 drop it rallied back to close right near a new four week high. AHC even lowered Q4 production targets due to problems at several facilities not related to hurricanes. There is something going on under the covers with AHC and I would not be surprised to see a buyer appear. AHC would be a large bite for an acquirer with revenues in the $200 billion range. Insiders own more than 15% of the stock and the float at 92 million shares is relatively low. If we get that break over $122 I would definitely be a buyer.
The post earnings COP dip was less than expected but still a respectable trade from a low at $60 back to close over $63 on Friday.
APA - Apache never came close to my $55 dip target and appears to have strong support at $60. It might be worth gambling on it here but definitely be a buyer over $66.
TSO - Tesoro also failed to dip materially and a break over $62 could be a new trend in the making.
The official watch list will remain very skinny until a new trend appears. I am adding only CHK and UPL for breakouts
Current Watch List
CHK - $31.43 Chesapeake Energy
Chesapeake Energy Corporation is an oil and natural gas exploration and production company engaged in the acquisition, exploration and development of properties for the production of crude oil and natural gas from underground reservoirs and the marketing of natural gas and oil for other working interest owners in properties that it operates. The Company's properties are located in Oklahoma, Texas, Arkansas, Louisiana, Kansas, Montana, Colorado, North Dakota and New Mexico. The proved oil and natural gas reserves as of December 31, 2004 were approximately 4.9 trillion cubic feet of gas equivalent (tcfe). At December 31, 2004, approximately 89% of the Company's proved reserves (by volume) were natural gas, and approximately 70% of its proved oil and natural gas reserves were located in the primary operating area, the Mid-Continent region of the United States, which includes Oklahoma, western Arkansas, southwestern Kansas and the Texas Panhandle.
Breakdown Target $29
UPL - $52.30 Ultra Petroleum
Headlines from their earnings on Oct-26th:
Ultra Petroleum Corp. is an oil and gas company engaged in the development, production, operation, exploration and acquisition of oil and gas properties. The Company's operations are focused in the Green River Basin of southwest Wyoming and Bohai Bay, offshore China. During the year ended December 31, 2004, it owns interests in approximately 166,974 gross (92,997 net) acres in Wyoming covering approximately 260 square miles. The Company owns working interests in approximately 241 gross productive wells in this area and is operator of 41.5% of the 241 gross wells. Through Pendaries Petroleum Ltd., it is active in oil and gas exploration and development in Bohai Bay, China. The Company also owns interests in 15,518 gross (14,652 net) acres in Pennsylvania, as well as interest in approximately 720 gross (320 net) acres and interests in three productive wells in Texas.
Stop loss $48
Another way to play the high premiums would be:
Sell 2007 $70 LEAP Put OZH-MN currently $23.00
Larger account holders could buy the March put below to reduce the cost but
still remain protected until March $45 put at $3.80.