Which is the Better Short: Penn Virginia vs. Swift Energy?

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Short interest in Penn Virginia and Swift Energy is more than 30%.

Short interest in Penn Virginia and Swift Energy is more than 30%.

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  • https://www.flickr.com/photos/pixelpackr/194555983/in/photolist-ic9Hv-ic9H6-7XkWMY-6UbkPE-jXzvAY-iihQzR-AL9t-nBQ6yd-gx7dah-5jQVjm-8eh6Q9-NKWVi-fkwjpT-57Vbpx-8cFtP9-auS9V9-ysvd-nkyyD1-dpHTy8-NKWWD-8Eww7E-NKWVP-8edQtM-8HoE3-NKWVD-NKWXr-8eh7ds-iCB3R-NKWV8-94zeQF-94zfax-gx7PoA-4mHoWL-8Qt9W3-ewMg35-8gXXKS-aQekKx-471EuR-edJnam-7WHPki-cSWygw-8ajEZM-57ZpD1-8ztJ5W-8ccTJV-85pwUH-4tFHGj-7WHPjn-83tid7-4QMeau
  • http://www.eia.gov/naturalgas/crudeoilreserves/
  • https://www.flickr.com/photos/fsecart/549277847/in/photolist-bH1iX8-chEwR9-42PQoC-a2YSa6-62QVKf-dTUAhR-QxcaH-7jm7SP-dSZe91-8F5t1j-dUSc9a-a5SwX-68vjKV-68zxeQ-9C9vCS-9ZA9J6-9kJxyv-9uKMHb-68zxij-bDwJ11-dK2oa7-bu6sBd-8usD9K-657VsP-5XW3k4-bbeUhH-61LYTT-dSK3tm-8ism9f-8ismaU-4Kdou8-cnchKE-dmyfCP-chEbX5-doZD-8ismdA-62LFqP-cEJ54Q-8ip6ZZ-cNdyo-bu6pKh-knHgd-9htwiK-9VwVc2-9htwN2-8HWvej-62LEPx-7HedAv-kyBTGB-bH1eiH
  • https://www.flickr.com/photos/59937401@N07/5930176734/in/photolist-a32GWs-chEfau-62QSKq-9qUDuJ-bZwG3C-8ip6Yn-CrMvv-a2Y6J8-64gotj-gjJMZC-a2Yc86-5tzhjp-9Zkom5-8i2WXz-fBsQs-7CrchT-7BfThk-jYGnx-9kNTbs-aiphLC-9FPrx5-du8MtP-4Hrq53-BhdpN-8JkcMH-4ZAk72-9hwDnd-9qUFub-9VAoaM-5z3f3L-fxFR1Q-548Abb-9VAAZU-bZwfxo-9hwDJ5-dGo5nf-9K71ih-aeFyin-9qUCso-7WAEm8-ev2AR5-bjB39c-9kMAcY-p9WoZ-eA2zRg-bZwHv5-6bwpmk-9VDo4N-dAu1EJ-bu6t6u
  • http://www.swiftenergy.com/INVESTOR-RELATIONS/Current-Corporate-Presentations/sfy-corp-5-2014-updated.pdf
  • http://files.shareholder.com/downloads/AMDA-1PYQVM/3328362932x0x767349/1d179c89-5915-4ec3-871b-b316c9fdafb9/PVA_Investor_Presentation_July_2014_2_.pdf
  • http://www.sanchezenergycorp.com/wp-content/uploads/2014/06/2014.6.30-SN-July-Presentation.pdf
  • https://www.flickr.com/photos/76657755@N04/7027588775/in/photolist-bH1eiH-knHgd-f54gtt-9qRF8r-6QFDYU-4BfaUm-7987Vs-bH1gac-ght8m7-62LD8Z-62QVb5-6hSkjK-5KQyH9-chEaLb-5WEQZB-4sUYDb-aB7uKh-9PSLHY-fKKcRD-bxDiow-dSXXyh-9VADkr-9gYtwj-6c6Q6r-cEHZc1-nQZguc-bi1bhM-9qREU2-9KU6T1-9qUEUf-4e5gDL-8ip6YF-a32J27-8ddtDt-8PWifN-bZwdFC-9kNSHL-9kMUQb-4e1gT8-oh2EL-fEHuLF-5yL49b-a32GWs-chEfau-62QSKq-bZwG3C-8ip6Yn-CrMvv-a2Y6J8-8ip71R

Transcript

  • 1. Which is the Better Short: Penn Virginia vs. Swift Energy?
  • 2. The Eagle Ford Shale is fueling massive growth in American proved oil reserves.
  • 3. Because of that it has been a hotbed of investment and the shale play is fueling big gains for investors. Photo credit: Flickr/fsecart
  • 4. That being said, not every company operating out of the Eagle Ford Shale has won the praise of investors. Two stocks in particular are among the most heavily shorted in the whole sector as investors worry that these stocks will incinerate their investment. Photo credit: Flickr/TaxRebate.org.uk
  • 5. Big Short No. 1: Swift Energy Investors sold short 34.2% of Swift Energy’s shares. Source: Swift Energy Investor Presentation
  • 6. Swift Energy What has investors so worried:  Shares plunged earlier this year after the company reduced its 2014 production guidance.  It found that wells drilled in its Artesia area didn’t deliver consistent results.  The company’s balance sheet isn’t as strong as some of its peers.  Finally, a new joint venture will fuel growth in the company’s natural gas focused acreage in the Eagle Ford.  Goal is to grow from the 31st ranked gas producer in Texas to a top 20 producer by next year.
  • 7. Swift Energy Is shorting a good idea? Maybe – Swift Energy is starting to improve the areas that concern investors. The joint venture brought in cash to improve the balance sheet and fund drilling. The company is also focused on better wellbore placement, which is resulting in more consistent production. However, the focus on natural gas could burn investors if prices don’t improve.
  • 8. Big Short No. 2: Penn Virginia Investors sold short 34.1% of Penn Virginia’s shares. Source: Penn Virginia Investor Presentation
  • 9. Penn Virginia What has investors so worried:  Penn Virginia’s stock price surged 200% over the past year.  Part of the surge is due to the company’s Eagle Ford fueled oil production growth.  However, activist investor George Soros is pushing for the company to sell itself.  Investors are worried a sale won’t happen and the stock price will plunge.  Company also has substantial debt as it continues to outspend its cash flow.
  • 10. Penn Virginia Is shorting a good idea? Absolutely not – Penn Virginia is building one of the fastest growing oil platforms in the Eagle Ford Shale. Its oil production is expected to grow 65% this year. It’s also planning non-core asset sales to increase its liquidity to fund its accelerated growth plan. While its valuation might be stretched, that alone isn’t reason to go short.
  • 11. Bonus Short: Sanchez Energy Investors sold short 13.9% of Sanchez Energy’s shares. Source: Sanchez Energy Investor Presentation
  • 12. Sanchez Energy What has investors so worried:  Sanchez Energy recently spent $554 million on a natural gas rich asset in the Eagle Ford Shale.  Deal pushes Sanchez Energy’s reserves from 77% oil to 49% oil.  Deal also doubled the company’s Debt/Enterprise Value from 20% to 41%.
  • 13. Sanchez Energy Is shorting a good idea? Not really – Sanchez Energy seized the opportunity to buy cheap natural gas assets. This gives the company a lot of upside to natural gas, especially in the export marketplace. However, the big boost in debt should be monitored.
  • 14. Investor takeaway Swift Energy has under performed this year and might make shorts some money. However, Penn Virginia is a short to avoid. While its stock has soared this year that’s no reason to short. The market can stay irrational a lot longer than an investor can stay short. Photo credit: TaxCredits.net
  • 15. This energy company is becoming OPEC’s worst nightmare.