5 Best Energy Stocks of the Week


Published on

Published in: Economy & Finance, Business
1 Comment
No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

5 Best Energy Stocks of the Week

  1. 1. 5 Best Energy Stocks of the Week
  2. 2. This Week in Energy • U.S. production still increasing; gasoline stockpiles high • Libya exports coming back online • Concerns over losing Iraqi production waning Energy sector down 1.85%: Global oil supplies are on the rise, sending prices lower
  3. 3. This Week’s Top 5 Energy Performers NYSE: PE up 4.95% NASDAQ: AHGP up 3.88% NASDAQ: MRD up 3.84% NYSE: CXO up 3.82% NYSE: SUSP up 3.48%
  4. 4. Parsley Energy Why is it up this week? • After its initial public offering back in May, several analyst groups initiated coverage this week, most of which is favorable. –Most recent: RBC Capital’s rating of “sector perform,” with a very favorable price target
  5. 5. Parsley Energy Who is it? An exploration and production company in the heart of the Permian Basin. Pros: • Location -- the Permian is a great place to be right now • Lots of potential well sites to grow production Cons: • Getting only 53% oil in production, low compared with other Permian players • Priced at extremely high premium (TEV/EBITDA= 23.9)
  6. 6. Parsley Energy Does this week matter in the big picture? Price targets and analyst opinions won’t change this business, nor the long term outlook for this stock. What really matters right now is whether the company can grow production, so watch for earnings reports and conference calls to get a better picture of guidance.
  7. 7. Alliance Holdings GP Why is it up this week? • Analysts at Raymond James seem to really like this coal stock, giving it a strong buy rating and a price target of $77.00. – Price as of end of week: $68.87
  8. 8. Alliance Holdings GP Who is it? A general partner of Alliance Natural Resource Partners, just about the only coal company in America that’s actually making money today. Pros: • Reducing costs while increasing production • Squeaky-clean balance sheet • Rising distributions Cons: • Coal is a tough place to be; coal prices are weak from oversupply • Long-term outlook for coal in U.S. in decline
  9. 9. Alliance Holdings GP Does this week matter in the big picture? Price targets and analyst opinions don’t really mean much, but … ARLP is slowly gaining market share thanks to its low-cost production in the Illinois Basin region, which is leading to higher distribution payments at the general partner.
  10. 10. Memorial Resource Development Why is it up this week? • After its initial public offering back in June, several analyst groups have initiated coverage with strong buys.
  11. 11. Memorial Resource Development Who is it? A general partner of Memorial Production Partners, a natural gas producer with acreage in the Rockies, East Texas, and Louisiana Pros: • Lots of room to grow production (up 54% since Q1 2012) • East Texas and Louisiana acreage in region with high demand and lots of infrastructure to get it to market Cons: • One-year decline rates very high (approximately 65%), very challenging for E&P company structured as an MLP
  12. 12. Memorial Resource Development Does this week matter in the big picture? Price targets and analyst opinions won’t change this business, nor the long-term outlook for this stock. Investors need to worry more about whether the company can grow production to cover high decline rates and whether the MLP can cover its distributions.
  13. 13. Concho Resources Why is it up this week? • Several analysts have increased their 2014 earnings estimates for Concho, thanks to better-than-expected production growth. –Earnings for FY 2014 increased from $4.31 to $4.35 per share
  14. 14. Concho Resources Who is it? And exploration and production company focused solely on the Permian Basin. Pros: • Strong acreage position in one of the United States’ best shale formations • Production growing fast (up 23% year over year) • Strong cash operations compared with many small E&P companies (operational cash flow covers 80% of capital expenditures) Cons: • High premium for shares (P/E ratio of 49.3) • High level of debt (debt/capital = 49.4%)
  15. 15. Concho Resources Does this week matter in the big picture? Increased production leading to better-than- expected earnings is a good sign. What really matters for Conch in the future is to be able to cover its capital expenditures with cash flow from operations.
  16. 16. Susser Petroleum Partners Why is it up this week? • Ummm … good question. – No press releases, no analyst rating changes, no tangible changes to the business – Somebody might give some technical analysis explanation, but the stock is just up -- end of story
  17. 17. Susser Petroleum Partners Who is it? A master limited partnership specializing in wholesale distribution of refined petroleum products, mostly supplying retail stations owned by Susser Holdings. Pros: • Long-term fee-based contracts provide stable cash flows • Strong distribution coverage (coverage ratio = 1.22) • Well-financed general partner (Energy Transfer Partners) Cons: • Very low-margin business (gross margin 1.4%) • Priced pretty high for MLP (price/distributable cash flow=19.46)
  18. 18. Susser Petroleum Partners Does this week matter in the big picture? Nothing happened. So how can that have any tangible impact on the long-term impact of the company?
  19. 19. How You Can Profit From America’s Energy Tax “Loophole”…