and mid-cap energy stocks respond to big news in big ways. Senior Analyst
Jocelyn August of Sagient Research keeps track of
events and related share price movements that can shed light on how stocks
will perform when new triggers are pulled. In this exclusive interview with The Energy Report, August
discusses some of her favorite and not-so-favorite names that could make
profits (or losses) for attentive investors.
Report: In the current environment, do catalysts matter?
They do matter. At first glance, last quarter was
negative for a lot of stocks. I recently got my 401(k), and it didn't look so
good. But we did see a lot of stock movement in Q2/12 in the natural
resources realm. We actually recorded 14 double-digit stock price moves,
including eight in the energy sector. Some are positive and some of them are
What trends are you seeing in catalysts versus share price movement?
the most part, the catalysts that move energy stocks the most are those that
can show how well a prospect is going to perform for a company. Drilling
announcements, especially if they are for test or exploratory wells, have an
effect. A start or a completion of drilling is also important.
What are some examples?
largest one-day move we saw recently was a 22% negative move for Samson Oil & Gas Ltd.
(SSN:ASX) following its announcement of the start of
production at its Gretel II 12 KA 3 well at its Roosevelt oil project in
Montana. You would think that a production start announcement would yield a
positive stock price, but if you actually look at the announcement, we noted
that the well yielded much lower oil production than expected. That's why the
move was downward.
But we did also
see some very large, positive, one-day moves. GMX
Resources Inc. (GMXR:NYSE)
announced the completion of fracture stimulation at one of its wells in the
Williston Basin of North Dakota. With this announcement, we saw a one-day
upward move of 18%.
is up 6% over the past four weeks, but down 39% over the past 12 weeks. What
is your take on this? Are you positive on this company?
am pretty positive on GMX. It has had some very large, event-driven moves
recently. It has a really small market cap of $62 million (M), and it has a
lot of projects that it's working on right now. The Williston Basin is really
hot right now. I think that in terms of volatility and market movement, GMX
is a good stock to go with.
What's the next catalyst for GMX?
company has several coming up in the next quarter. It has multiple wells in
the Williston Basin. It has Joliet 1-18H. It has Wilson 31-6H. It has
fracture stimulation at Fairfield State.
it your investment theory here that GMX is a small-cap company for which
really good news would yield a good lift in share prices? Is that it?
Yes, absolutely. I think when you're looking at small-cap companies that have
a smaller list of projects that they are working on, announcements from the
company with regard to the success or failure of certain projects are
obviously going to have a much bigger effect on their stock prices than, say,
a larger company that has a lot of projects going on.
one you wanted to talk about?
Last time we spoke, we talked a little bit about ATP Oil and Gas Corp. (ATPG:NASDAQ) and the Shimshon project it's working on in Israel. Recently, it
announced that it had started drilling there, and it gave some preliminary
results. After this announcement, its stock jumped 25% but if you look at it
now, it has pretty much come back to the level it was at before. I think
investors realized this company has a lot of other problems, like a pretty
high debt load. While Shimshon may be a really
great thing for it, even if it can be shown to be as successful as the Noble Energy Inc. (NBL:NYSE)
project that's in Israel, it's still not going to be a complete solution to
all of ATP's problems. After the stock jumped 25%, everybody said, wait,
let's really look at what's going on with this company.
expecting to announce further results on the Shimshon
well in this quarter, which we highlighted in our CatalystTracker
Natural Resources Q3 Outlook report. This
announcement could have a pretty good effect on the stock if it announces
positive results, or it could be negative if it were to announce that it
actually didn't yield as much as the company expected.
market has really punished ATP. It is down 84% over the past 12 months, down 62%
over the past three months and down 35% over the past four weeks. The Shimshon project is a gas well, but margins on natural
gas can be very good in Southwest Asia.
think in that part of the world, the margins would actually be pretty good,
so the prospect for that well and for the exploration in general in that area
is very good. I think that the punishment of ATP's stock is probably more
related to the high debt load. The fear is that it has $1.5 billion (B) of
debt coming due in a couple of years with the potential that its cash flows
aren't going to be able to cover that.
Does this low stock price represent value? Is your opinion favorable on ATP?
would say I'm neutral. If ATP can get something going at Shimshon
and if it can achieve more success in the Gulf of Mexico, it could turn out
to be a very undervalued company. But I think we
need to wait for more results from Shimshon.
ahead with your next one.
JA: Uranium Energy Corp. (UEC:NYSE.A) is a
U.S.-based producer. I have seen a lot of downward moves over the past year
despite the fact that it has had a lot of good announcements. It is moving
its projects along. It started producing more from its Palangana
project in Texas, and again, that was met with more downward moves. I think
that the political environment for uranium has been pretty negative since
March 2011 with the Fukushima Daiichi nuclear disaster in Japan. I also think
the political environment in the U.S. has something to do with it. Given that
Japan has made some announcements that it will be starting up some more
reactors, I'm hopeful the environment for uranium is going to become a little
bit more positive. Also, given that, the stock price of Uranium Energy is
fairly low, if the political environment becomes more positive, and if it
keeps making positive announcements about exploration and about what it's
working on in Texas, I think that those announcements and the company are
going to get noticed.
What catalysts should investors know about?
biggest one that it has upcoming is for Goliad. Goliad's measured and
indicated resource estimate is 5.4 million pounds (Mlb)
uranium, which is four times larger than that of Palangana.
We are projecting that Palangana is currently
producing around $10M worth of annual revenues with approximately
175,000–200,000 pounds annually. Uranium Energy is expecting Goliad to
be on-line and producing by March 2013. At that point, that's going to mean a
much larger revenue stream for the company.
is my understanding that total U.S. uranium production is only 4 Mlb/year and that we import more than 90% of our needs.
Next year or the year after Uranium Energy could be producing 2 Mlb by itself. Are there a lot of catalysts coming up?
Would Japan starting up reactors lift all boats?
think that would definitely lift all boats but, again, I think Goliad is
going to be something that will be very positive. It also is waiting for an
exploration permit for its new project, the Channen
project, which is near Goliad.
you positive on Uranium Energy?
had previously talked about McMoRan Exploration Co. (MMR:NYSE), and we're still waiting on Davy
Jones. I wanted to highlight it again because it consistently has news coming
out for this project. It has experienced significant delays, but I think it's
on the road to near-term production. We're probably looking at August, but
again, we're waiting for an announcement from McMoRan
on the flow rates.
has McMoRan been such a fantastic performer? Over
the past 12 weeks, it's up 62%. That looks like an inverse image of others in
the industry. Over the past four weeks, it's up 18%.
Despite the fact that it continues to have these delays, which at face value
would seem not to be a good thing for the company, McMoRan
is revolutionizing the industry and it is working on several other ultra-deep
wells as well as Davy Jones. The reason it has experienced so many delays is
because it has had to innovate all of this on its own. It has had to come up
with the equipment. It has had to figure out how to engineer these wells for
this very deepwater drilling. That's something that
nobody has done before. So if it is successful with Davy Jones and some of
its other ultra-deep wells, then it will become a leader. It will be the
company that everyone else looks to for this type of drilling, and it will be
able to capitalize on the fact that it has the experience to be able to get
to this gas, which previously has been unavailable.
This is such a tough project considering the depth, the necessary engineering
and the associated risk. Could the performance here portend good performance
for other gas-well drillers?
would think so. The political environment for gas right now is pretty good;
it's seen as a more environmentally friendly form of energy. If companies are
able to get more of it from places where it was previously unavailable, then
obviously that's going to be a positive for a lot of other gas companies.
Speaking of gas
in other areas besides the U.S., we are also looking at FX Energy Inc. (FXEN:NASDAQ). It is doing a
lot of gas drilling in Poland.
Energy is up 19% over the past four weeks and up 23% over the past six
It's definitely interesting, and it's one that we highlighted in our Outlook
report. Poland is an attractive market because it has significant hydrocarbon
potential, which is very largely unexplored, and right now current domestic
production in Poland is not enough to meet demand in that area. So, if these
projects are economically viable, FX Energy would be in a very favorable
position. It is drilling multiple wells in that area that are targeting the Rotliegend formation.
We are looking
at a lot of different catalysts that are approaching this quarter,
particularly in the Fences area where FX has been drilling multiple wells. It
has made several announcements recently regarding these wells, including the
conclusion of casing at the Kutno well in July when
it also announced results from one of its Komorze
wells. It is expecting results from multiple wells this quarter. These could
mean some very positive moves for the company.
Which would be the major catalyst?
JA: Kutno is a new area that it is working on and it has not
been proven yet, so positive results from this area could be very favorable.
Jocelyn, you follow Liberty Star Uranium & Metals
Corp. (LBSR:OTCBB). It
has an $18.75M market cap. What's going on there?
is working on some projects in Alaska, Mexico and Arizona. It has a couple of
catalysts that we're looking at for this quarter for Tombstone, including a
permit approval and potentially a surveying start. We saw some other
catalysts from this project in May when it had an announcement of some sample
test results. It actually moved the stock price up by 11%. Yes, it has a very
small market cap/share price. Again, I think the small market cap and low
price may have to do with the uranium situation overall.
you positive on Liberty Star?
its best prospects in uranium or in metals?
seems like it has mostly metals. It does have a uranium property in Arizona,
but it doesn't look like it has a lot of catalysts for that right now.
talked about Ivanhoe Energy Inc. (IE:TSX; IVAN:NASDAQ) the last time
we spoke. Can you update me on it?
We're looking at some drilling results that are expected this quarter for the
Hollin IP-17 well in the Pungarayacu
field in Ecuador. It is in the business of heavy oil and uses heavy-to-light technology
to improve and convert heavy oil to lighter oil, which is more valuable and
can be more easily transported via pipeline. So we're expecting that it is
going to continue drilling through Q3/12 and announce results before the
quarter ends for this Hollin field. It actually
announced on July 12 that it had drilled Hollin to
approximately 10,500 feet and it had some evidence of hydrocarbon. So we're
looking at some more detailed results as this drilling continues this
you still bullish on Ivanhoe?
What about Apco Oil & Gas International Inc.
(APAGF:NASDAQ)? Do you follow
Yes, we do follow Apco. We had a big catalyst for
it last quarter. It was a negative catalyst. It is doing a lot of drilling in
Colombia where it's hard to figure out what is going to happen because of the
political environment. It seems to be doing pretty well, but it can be hard
when you have natural resources in Colombia.
What about catalysts affecting Gran Tierra Energy Inc. (GTE:NYSE; GTE:TSX)?
That is another one that we expect will have a lot of drilling catalysts in
Brazil and Argentina this quarter. We have one for Azar,
which is actually expected to reach total depth in early August, and then
we'll have some results.
follow Endeavour International (END:NYSE.A).Tell us about
That one actually saw a large move last quarter as well. It is interesting
because it has a lot of projects in the United Kingdom's North Sea. It has
been in that area for a long time, but its large-mover catalyst last quarter
was actually in the Heath shale in Montana. It had a 19% upward move with
well results for that one. Endeavour seems to be diversifying and getting
into other areas besides the North Sea.
What's the next catalyst for Endeavour?
have several catalysts this quarter. We have catalysts for Bacchus, where we
will see a second well begin production this quarter. We're also waiting on a
project sanctioning for Columbus.
What about Noble Energy?
also has a large project in the North Sea called the Bream project. We're
waiting on the project sanction for that by year-end.
you positive on Noble?
Yes, we are. It has a much larger market cap.
Thank you, Jocelyn.
about Sagient's CatalystTracker
August is currently the senior analyst and product manager
for CatalystTracker, a proprietary research product
focused on identifying and analyzing the future events that will materially
impact publicly traded companies. In her five years at Sagient,
she has developed expertise in the highly event-driven medical device and
diagnostic sector. In addition, she spearheaded the development of a new
natural resource industry product within the CatalystTracker
product line with the publication of the Catalyst Impact Study: Natural
Resources Sector. Outside of Sagient, August was
named the director of communications for the San Diego Professional Chapter
of MBA Women International. August received a Master of Business
Administration from the Rady School of Management
at the University of California, San Diego and graduated cum laude from UC
San Diego with a Bachelor of Arts degree in sociology.
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1) George S. Mack of The
Energy Report conducted this interview. He personally and/or his
family own shares of the following companies mentioned in this interview:
2) The following companies mentioned in the interview are sponsors of The Energy Report: Uranium
Energy Corp. and FX Energy Inc. Interviews are edited for clarity.
3) Jocelyn August: I personally and/or my family own shares of the following
companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this
interview: None. I was not paid by Streetwise Reports for participating in