One More Dip Please
With the potential for another dip as we enter October I added four additional candidates to the watch list. This should cover the best of the available candidates from multiple sectors, refining, exploration and production. There are plenty of stocks out there but looking under the hood produces more questions than answers.
I also changed several targets on the previous entries.
Future watch list additions will come from sectors other than energy and only when real value appears. For instance I debated whether to add any materials stocks this week but I passed to focus on adding a few more energy candidates before the winter rebound.
Current Watch List
LTR - Loews Corp
Loews Corporation is a holding company. The lines of business the subsidiaries are engaged include commercial property and casualty insurance (CNA Financial Corporation (CNA), a 91% owned subsidiary); production and sale of cigarettes (Lorillard, Inc. (Lorillard), a wholly owned subsidiary); operation of interstate natural gas transmission pipeline systems (Boardwalk Pipeline Partners, LP (Boardwalk Pipeline), an 85%-owned subsidiary); operation of offshore oil and gas drilling rigs (Diamond Offshore Drilling, Inc. (Diamond Offshore), a 54%-owned subsidiary); operation of hotels (Loews Hotels Holding Corporation (Loews Hotels), a wholly owned subsidiary), and distribution and sale of watches and clocks (Bulova Corporation (Bulova), a wholly owned subsidiary).
Breakdown target: $36.50 - Firm target
Buy 2009 $40 LEAP Call VRH-AH
CHK - Chesapeake Energy
Chesapeake Energy Corporation (Chesapeake) is an oil and natural gas exploration and production company. It is 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 it operates. As of December 31, 2005, the Company owned interests in approximately 30,600 producing oil and gas wells, which were producing approximately 1.5 billions of cubic feet equivalents (bcfe) per day. On November 14, 2005, Chesapeake acquired Columbia Energy Resources, LLC and its subsidiaries, including Columbia Natural Resources, LLC (CNR) and its natural gas reserves, acreage and mid-stream assets. In 2006, the Company acquired oil and natural gas assets from private companies located in the Barnett Shale, South Texas, Permian Basin, Mid-Continent and Ark-La-Tex regions. It also acquired an Oklahoma-based trucking company in 2006.
CHK appears to be headed for a retest of support at $27 but I am hoping for a drop all the way back to $25.
Breakdown Target: $27.50
Buy 2009 $30 LEAP Call VEC-AF
ECA - Encana
EnCana Corporation is a natural gas producer in North America. It is a holder of natural gas and oil resource lands onshore North America. The Company is also engaged in select exploration and production activities internationally. EnCana operates under two main divisions: Upstream and Midstream & Marketing. The Upstream division manages EnCana's exploration for, and development and production of, natural gas, crude oil and natural gas liquids (NGLs) and other related activities. EnCana's Midstream & Marketing division encompasses the Corporation's market optimization activities and remaining midstream assets. EnCana is in the process of divesting the majority of its remaining midstream assets, including its natural gas storage business and the Entrega Pipeline.
Strong support at $40 should be our first target with a backup at $35 for a second position. Encana is attempting to sell some midstream assets and that could impact the stock price significantly when it happens.
Breakdown target: $42.50 *** Change ***
Buy 2009 $50 LEAP Call ZBM-AJ
DVN - Devon Energy
Devon Energy Corporation (Devon) is an independent energy company engaged primarily in oil and gas exploration, development and production, the acquisition of producing properties, the transportation of oil, gas and natural gas liquids (NGLs) and the processing of natural gas. Devon operates oil and gas properties in the United States, Canada and various regions located outside North America, including Azerbaijan, Brazil, China, Egypt, Russia and West Africa. In addition to Devon's oil and gas operations, it has marketing and midstream operations. These include the marketing of natural gas, crude oil and NGLs, and the construction and operation of pipelines, storage and treating facilities and gas processing plants. The Company sells its gas production to a range of customers, including pipelines, utilities, gas marketing firms, industrial users and local distribution companies.
Devon is a 25% partner in the new BP discovery in the Gulf. This is a huge windfall for Devon but it is also a long way off before any income is received. Hopefully the initial spike will fade and we can get it cheap.
Breakdown target: $60 *** Change ***
Buy 2009 $70 LEAP Call VVH-AN
COP - Conoco Phillips
ConocoPhillips is an international, integrated energy company. The business is organized into six operating segments: Exploration and Production (E&P) segment primarily explores for, produces and markets crude oil, natural gas and natural gas liquids on a worldwide basis; Midstream segment gathers and processes natural gas produced by ConocoPhillips and others, and fractionates and markets natural gas liquids, primarily in the United States, Canada and Trinidad; Refining and Marketing (R&M) segment purchases, refines, markets and transports crude oil and petroleum products, mainly in the United States, Europe and Asia; LUKOIL Investment segment consists of its equity investment in OAO LUKOIL, an international, integrated oil and gas company in Russia; Chemicals segment manufactures and markets petrochemicals and plastics on a worldwide basis, and Emerging Businesses segment encompasses the development of new businesses beyond its traditional operations.
Conoco has returned to support at $58 but I am betting it will collapse once oil hits $60. COP is the most undervalued major according to Forbes with a PE of only 5.5. I believe $50 is a major support level that will be revisited soon. If so we are going to take a position despite the lack of a recent uptrend on their chart. COP had a lot working against it in 2006 and those factors have faded.
Breakdown target: $51
Buy 2009 $60 LEAP Call OJP-AL
CVX - Chevron Corp
Chevron Corp. (Chevron), formerly ChevronTexaco Corporation, manages its investments in subsidiaries and affiliates, and provides administrative, financial and management support to the United States and foreign subsidiaries that engage in integrated petroleum operations, chemicals operations, coal mining, power and energy services. Petroleum operations consist of exploring for, developing and producing crude oil and natural gas; refining crude oil into finished petroleum products; marketing crude oil, natural gas and the many products derived from petroleum, and transporting crude oil, natural gas and petroleum products by pipeline, marine vessel, motor equipment and rail car. Chemicals operations include the manufacture and marketing, by affiliates, of commodity petrochemicals for industrial uses, and the manufacture and marketing, by a consolidated subsidiary, of fuel and lubricating oil additives.
Like Conoco Chevron has failed to impress investors over the last year. There is strong support at $55 and I believe it will retest that level before the fall is over. Chevron did make a like discovery to the BP find in the Gulf but it was under reported and Chevron's boost promptly faded. If we can buy it right we will bet on future discoveries in the same area.
Breakdown target: $56
Buy 2009 $60 LEAP Call VCH-AL
ATI - Allegheny Tech
Allegheny Technologies Incorporated (ATI) is a producer of specialty materials for global markets. The Company operates in three business segments. The High Performance Metals segment produces, converts and distributes a range of high-performance alloys, including nickel and cobalt-based alloys and super alloys, titanium and titanium-based alloys, exotic alloys, such as zirconium, hafnium, niobium, nickel-titanium and their related alloys. The Flat-Rolled Products segment produces, converts and distributes stainless steel, nickel-based alloys, and titanium and titanium-based alloys, in a variety of product forms, including plate, sheet, strip, engineered strip and Precision Rolled Strip products. The Engineered Products segment produces tungsten powder, tungsten heavy alloys, tungsten carbide materials and carbide cutting tools. On April 5, 2005, the Company acquired Garryson Limited, a producer of tungsten carbide burrs, rotary tooling, and specialty abrasive wheels and discs.
Yes, ATI is into high performance metals. They are also the only major manufacturer of very high strength pipe capable of being used in wells like the new Gulf discoveries by BP and Chevron. Drilling 30,000 feet under 7500 feet of water requires extreme performance pipe for every stage of the underwater application. This pipe segment is rapidly growing for ATI and will become a major profit center over the next two years. There is strong support at $55 but I would like to try and tag it at $50 if possible.
Breakdown target $58.00 *** Change ***
Buy 2009 $70 LEAP Call OYG-AN
RIG - Transocean Inc
Transocean Inc. (Transocean) is an international provider of offshore contract drilling services for oil and gas wells. As of March 2, 2006, it owned/had partial ownership interests in, or operated 89 mobile offshore and barge drilling units. Its fleet included 32 High-Specification semisubmersibles and drillships (floaters), 23 Other Floaters, 25 Jackup Rigs and nine Other Rigs. The Company's primary business is to contract these drilling rigs, related equipment and work crews primarily on a day-rate basis to drill oil and gas wells. It specializes in sectors of the offshore drilling business with a focus on deepwater and harsh environment drilling services. The Company also provides additional services, including integrated services.
There are only two major companies that can drill in 7500 ft of water. DO and RIG. We already own DO and I would like to get a piece of RIG as well. RIG has already announced a long term contract to construct and operate a new drillship for BP and odds are good there will be more to follow once the other players want to start exploring their blocks. There is decent support at $65 but I am targeting a breakdown to $60 with stronger support at $55.
Breakdown target: $68 *** Change ***
Buy 2009 $80 LEAP Call VOI-AP
MRO - Marathon Oil
Marathon Oil Corporation (Marathon) is engaged in the exploration and production of crude oil and natural gas on a worldwide basis. The Company operates in three business segments: Exploration and Production (E&P), Refining, Marketing and Transportation (RM&T) and Integrated Gas (IG). The E&P segment explores for and produces crude oil and natural gas on a worldwide basis. The RM&T segment refines, markets and transports crude oil and petroleum products, primarily in the Midwest, the upper Great Plains and southeastern United States. The IG segment markets and transports natural gas and products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol on a worldwide basis. On June 30, 2005, the Company acquired the remaining 38% ownership interest in Marathon Ashland Petroleum LLC (MAP). As a result of the acquisition, MAP became a wholly owned subsidiary of Marathon and was subsequently renamed as Marathon Petroleum Company LLC (MPC).
Breakdown target: $70
Buy 2009 $80 LEAP Call VXM-AP
TSO - Tesoro Corporation
Tesoro Corporation (Tesoro) is an independent refiner and marketer of petroleum products with two major operating segments: Refining and Retail. Through its refining segment, the Company manufactures products, primarily gasoline and gasoline blendstocks, jet fuel, diesel fuel and heavy fuel oils for sale to a variety of commercial customers principally in the mid-continental and western United States. It operates six refineries in the United States with a combined rated crude oil capacity of 558,000 barrels per day (bpd). During the year ended December 31, 2004, approximately 50% of the Company's total refining throughput was heavy crude oil. Its retail segment distributes motor fuels through a network of branded gas stations, primarily trading under the Tesoro and Mirastar brands. The Company markets its products to wholesale and retail customers, as well as commercial end users.
BAC upgraded TSO to a buy on 9/27
Breakdown target $55
Buy 2009 $70 LEAP Call ZGC-AN
HES - Hess Corporation (Formerly Amerada Hess (AHC))
Hess Corporation explores for, develops, produces, purchases, transports, and sells crude oil and natural gas. These exploration and production activities take place in the United States, United Kingdom, Norway, Denmark, Russia, Equatorial Guinea, Algeria, Gabon, Libya, Indonesia, Thailand, Azerbaijan, Malaysia and other countries. The Company also manufactures, purchases, trades and markets refined petroleum and other energy products. It owns 50% of a refinery joint venture in the United States Virgin Islands, and another refining facility, terminals and retail gasoline stations located on the East Coast of the United States. As of December 31, 2005, the Company had 692 million barrels of proved crude oil and natural gas liquids reserves.
Breakdown target $35
Buy 2009 $40 LEAP Call VHS-AJ
SWN - Southwestern Energy
Southwestern Energy Company is an integrated energy company primarily focused on natural gas with proven reserves of more than 825 BCF. Through its wholly owned subsidiaries, the Company is engaged in natural gas and oil exploration and production business. It operates principally in three segments: exploration and production, natural gas distribution and marketing. The Company's exploration and production activities are concentrated in Arkansas, Texas, Louisiana, New Mexico and Oklahoma. It's wholly owned subsidiary, Arkansas Western Gas Company, referred to as Arkansas Western, operates integrated natural gas distribution systems in northern Arkansas. The Company provides marketing services in each of its core areas of operation through its gas-marketing subsidiary, Southwestern Energy Services Company.
Breakdown target: $25
Buy 2008 $30 LEAP Call LVX-AF (no 2009 leaps)