Tag - Energy

It's always tough to buy stocks when you should - just like it takes guts to be the first person to jump into the ocean after a shark attack, even in places where those are rare events.

Over the last year, overseas tensions drove the price of oil higher and had many people worried. Lately, the price of oil has plummeted on economic growth concerns.

Concerns over limited future oil production in the Middle East point to the growing importance of domestic energy production. The Obama administration, just like every administration before it, appears adamant that domestic energy production must grow.

While there remain concerns about the future of offshore oil exploration in the wake of the BP (NYSE: BP) disaster, land-based drilling for oil and natural gas is a sector likely to see continued growth.

One standout contender is Patterson UTI Energy (Nasdaq: PTEN), a Texas-based company that drills onshore wells for other companies that explore for oil and natural gas.

Japan's nuclear disaster probably set back the world's push toward nuclear-powered electric generation by years. Instead of huge nuclear energy expansion, which had been planned, we're likely going to see more nations stick with tried-and-true coal-fired electric plants, along with further expansion into natural gas.

The nuclear power industry may reap a multi-billion dollar windfall if new legislation passes that imposes regulatory limits on carbon dioxide emissions from power plants. Emissions-free nuclear power facilities would benefit, as would nuclear fuel suppliers Uranium Resources, Inc. (Nasdaq:URRE) and USEC, Inc. (NYSE:USU).

USEC Inc. supplies uranium fuel to commercial nuclear power plants worldwide. This company operates the only uranium enrichment facility in the United States and supplies fuel to more than half the U.S. market and one-quarter of the world market. USEC also performs contract work for the U.S. Department of Energy; it maintains two uranium processing plants, transports nuclear materials and provides nuclear fuel cycle consulting.

Demand for enriched uranium will likely rise if Congress votes to limit carbon dioxide emissions under a so-called “cap and trade” system. The intent of the program is to cut greenhouse gas emissions 65% below 1990 levels by 2050. As part of this program, the Environmental Protection Agency will create 125 billion purchasable emission allowances, enough for all 38 years of the program, which is scheduled to commence in 2012.

Nuclear facility operators will benefit in two ways. First, since nuclear plants do not emit carbon dioxide, these plants will not be required to purchase emission allowances, giving them a major cost advantage over coal-powered plants. Second, to recover emission-allowances costs, coal-fired utilities would be forced to jack up electricity rates. As a result, nuclear plants would enjoy higher prices for their electricity without higher costs. Finally, carbon emissions penalties would make the economics of developing a new nuclear plant more attractive.

At present, there are some 439 nuclear reactors operating worldwide. Another 33 are under construction and 94 new plants are scheduled to come online over the next five to 10 years. These plants currently consume some 79,000 tons of uranium each year, but each new gigawatt of capacity will require 195 tons of additional uranium production.

The majority of reactors served by USEC are refueled on an 18- to 24-month cycle, and most of the company’s customers refueled in 2007. As a result, USEC . . .

Rising fuel costs have grabbed the headlines over the past few years, with consumers feeling the pinch at the gas pump and in heating their homes. Much of the attention has focused on crude oil and natural gas, keeping coal buried deep in the news coverage.

Yet coal prices are rising, too, mostly on increased demand from Europe and Asia, and production shortages overseas. That’s good news for U.S. coal producers of all sizes, including James River Coal Co. (Nasdaq:JRCC). The stock closed Monday at $26, then following a release Tuesday morning that showed a steeper-than-expected first-quarter loss, the stock actually gained 10.31%, closing up $2.68 at $28.68.

That’s not some sort of a weird reverse reaction. Most of those gains followed a midmorning conference call, on which James River Coal’s chairman and chief executive, Peter Socha, offered his take on rising prices, and how his company is likely to benefit.

Coal is hot, with the Dow Jones U.S. Coal Index up 75% in the past year. Ahead of its Q1 report, James River Coal on Monday hit an intraday 52-week high of $27.19 — roughly eight times the 52-week low of $3.56 hit Aug. 16.

Investors have to dig deep into James River Coal Co. for that diamond in the rough. Analysts following the Richmond, Va., mining company offer a favorable outlook, with three calling it a “buy” and two rating it “hold,” according to Thomson Financial.

Founded in 1988 through the combination of smaller operations, with others added over the years, James River Coal overextended itself and entered into bankruptcy protection in 2003. A new James River Coal emerged from the tangles . . .

In late January and the first half of February, China's worst snowstorms and most severe winter weather since the government began keeping records in 1950 wreaked havoc on the country's energy infrastructure. Heavy snowfall, sleet and freezing temperatures disrupted coal shipments, crippled mainland transportation networks near oil and gas production facilities, snapped power lines, froze pipelines and even caused a number of power plants to shut down.
 
Outages left millions without power. Coal, which fuels 80% of China’s electricity supply, soared to record prices. Inflation in the country surged to an 11-year high in February. And electricity shortages, spikes in energy prices and the Chinese government's freezing of oil, natural gas, electricity and water prices for individual consumers are squeezing energy company profits.
 
The good news is the unusually rough weather that caused $3 billion in damages, according to the Civil Affairs Ministry, has blown over. And while it promises to be a tough year for China's battered energy industry, Chinese power companies and their suppliers remain good long-term bets, since the country's energy demand will continue to be robust (many industry analysts say Chinese power companies can expect double-digit consumption growth).
 
Hanwei Energy Services Corp. (TSE: HE.TO) serves major energy companies by providing products for the oil, coal, and wind power industries. The company manufactures and sells high-pressure, FRP (fiberglass reinforced plastic) pipes to the oil industry, develops pollution control products for the coal industry, and also engages in wind blade and other wind power product production.
 
Last December, Hanwei entered into an agreement with Daqing Deta Electric Co. Ltd., a provider of wind power turbines, blades, towers and control systems, to supply $232 million of wind power equipment over a three-year period. The initial order called for Hanwei to engineer, build and provide Deta with various wind power products, including 20 FRP wind blade sets, 20 turbines and 30 towers.

With global energy demand expected to rise 54% by 2025, accompanied by increasing oil prices, Gulf Island Fabrication, Inc. (Nasdaq: GIFI) and Hiland Holdings GP, LP (Nasdaq: HPGP) are benefiting from increased oil exploration activity and production spending by oil companies.

Gulf Island Fabrication builds drilling and production platforms that enable offshore oil exploration by energy companies. The company also constructs specialized structures used in off-shore production, such as jackets and decks for fixed production platforms and hulls and decks used for floating platforms, production storage and offloading vessels, offshore living quarters and tankers and barges. In addition, Gulf Island Fabrication provides offshore oilfield services such as connecting pipelines, lifting platform sections to be integrated into offshore ships, loading and offloading drilling rigs and production hulls, warehousing cargo and other materials.

The company operates fabrication yards in Louisiana and Texas and serves oilfield customers working in the Gulf of Mexico, Africa, the Middle East and the North Sea.

During the first nine months of 2007, Gulf Island Fabrication’s revenues improved 57% year-over-year to $371.8 million from $236.2 million and net income jumped 27% year-over-year to $22.3 million, or $1.56 per share, from $17.6 million, or $1.27 per share. Net income grew more slowly than revenues because of pass-through and contract labor costs Gulf Island Fabrication plans to pass on its customers.

So far in 2007, the company has increased cash dividend 33% to a $0.90 annualized rate. The outlook for the fourth quarter is equally as favorable: Gulf Island Fabrication ended the September quarter with a revenue backlog of $245.2 million and a labor backlog of approximately 2.7 million man-hours. Analysts expect this company to produce 35% growth this year, 28% growth next year and longer-term growth averaging 26% annually. Given this growth outlook, these shares appear reasonably priced at a nine times P/E multiple. My $35 target for Gulf Island Fabrication is above the closing price of $25.35 on Tuesday. The stock has traded between $24.88 and $39.37 over the last 52 weeks.

Flotek Industries, Inc. (NYSE: FTK) shares are plummeting after the Houston-based company lowered its fiscal 2007 earnings guidance to a range of $0.88 to $0.92 per share, from previous guidance of earning $1 per share. Analysts, on average, expect Flotek to earn $1.02 per share.

“The growth fundamentals of our core businesses remain sound, and the pace of North American oilfield service activity seems to be strengthening in January,” CEO Jerry Dumas said in a statement. “We believe the business line additions of the last several years will continue contributing to growth in 2008 and beyond as these businesses are integrated and ramp-up matures.”

The firm, a supplier of drilling and other services to the energy and mining industries, said general and administrative expenses are expected to be about 30% higher in the fourth quarter of 2007 than in the third quarter of 2007.

In midday trading, FTK shares are plunging 26.83%, or $6.83, at $18.63. Over the last 52 weeks, shares have ranged from $17.55 to $31.25.

Like the United States, China is pushing the development of alternative energy sources to reduce the nation's dependence on imported crude. In the face of spiraling oil prices and a domestic diesel fuel shortage, the Chinese biodiesel industry is receiving a lot of attention.

While corn-based ethanol is the most popular biofuel in the United States, biodiesel holds the top spot in China. Biodiesel is a clean-burning ("carbon neutral") and biodegradable fuel produced from feedstocks like waste oil (old cooking oil from restaurants), vegetable oil offal and animal fat, typically blended with standard diesel fuel, then used in trucks, buses, ships and electrical generators. The byproducts of biodiesel production are used in the food, manufacturing and pharmaceutical industries.

Gushan Environmental Energy Limited (NYSE: GU), the People's Republic of China's largest biodiesel producer in terms of annual production capacity, is betting on the growing use of biodiesel and the push toward a more energy independent China. In addition to providing biodiesel to individual retail gas stations, petroleum wholesales and seagoing vessels, Gushan sells by-products from the production process (glycerine, stearic acid, erucic acid, erucic amide and plant asphalt). The company operates three production plants in the Sichuan, Fujian and Hebei provinces and plans to soon add four new facilities in Beijing, Shanghai, Hunan and Chongqing, to more than double its annual production capacity to 400,000 tons by the end of this year. 

Last month Gushan staged an initial public offering on the New York Stock Exchange, raising $173 million (18 million shares at $9.60), though the stock was priced well below the expected range of $11.50 to $13.50. Since then, shares weathered cooling U.S. capital markets and rose to $12.72 on Jan. 3, before slowly falling back to the $9 range. Gushan’s 52-week low is $7. The company plans to use the IPO proceeds to fund expansion efforts and to strengthen research and development.

It helps to have friends in power, and AZZ Inc. (Nasdaq: AZZ) is making a gridful of them. By selling the essentials for power generation, transmission and distribution, AZZ is taking part in the flush times of its customers, building profits as it powers up the industry.

The dynamics of AZZ’s business is au courant. It is benefitting from the need for replacement equipment for the aging distribution substation and transmission grid market, expansionary spending in the petro-chemical market and the recovery of the power generation market. It balances sales across the power and industrial markets.

In addition to electrical equipment and components for global markets, Fort Worth, Texas-based AZZ provides hot dip galvanizing to steel products in the United States, a process that forestalls erosion. In fiscal 2007, the company’s electrical and industrial products segment accounted for 58% of sales, and galvanizing 42%.

Speaking on the fiscal 2008 third quarter conference call Jan. 4, CEO David Dingus said that not only is the power generation market encouraging, but “the maintenance of announced build schedules of new power generation plants, the emphasis on renewables such as wind energy, and the addition of scrubbers to existing facilities should continue to positively impact our market and orders in future quarters.”

The CEO’s remarks came as the company raised net income guidance for fiscal 2008 through February to $2.12 to $2.22 per diluted share, the highest in the 51-year history of the company and up from $1.95 to $2.05 previously. Revenues were projected in the range of $315 million to $325 million, unchanged from previous expectations.

OGE Enogex Partners L.P.
www.enogexpartners.com
NYSE: OGP
Scheduled for the week of Jan. 14
$142.5 million estimated proceeds
$468.5 million estimated post-money valuation

The University of Oklahoma’s football team lost its bowl game, which made me sad because the coach’s father was my high school American history teacher. Yes, there’s a tangential relationship between my anecdote and the OGE Enogex Partners IPO: OGE is Oklahoma Gas and Electric, and its parent company, OGE Energy, is spinning out its gas midstream services business that collects natural gas from wells in Oklahoma and the Texas panhandle, then processes, transports and stores the gas until other utility companies need it.

This business is set up as a limited partnership, offering units instead of shares. Unlike shareholders, unit holders can’t vote on the general partner or the board of directors, but they should receive good-sized cash distributions. The partnership itself doesn’t pay income taxes. Instead, it sends partners a form listing their share of the income and expenses, and then the partner pays the applicable taxes. This makes limited partnerships popular with such tax-exempt investors as pension plans and charitable endowments. When those investors buy shares in a corporation, the corporation pays taxes before making any distributions. With a limited partnership, a partner who doesn’t have to pay taxes has the potential to make bigger profits off of the investment.

OGE Enogex Partners plans to pay $0.34 per quarter ($1.35 per year) per unit, to change based on the performance of the business. If natural gas prices increase, then the partners should be making money. OGE Enogex had limited partnership income of $20.2 million on $659 million in revenue for the first nine months of 2007. It plans to pay down debt with the offering proceeds.

WSI Industries, Inc. (Nasdaq: WSCI), upgraded its fiscal 2008 sales outlook today on its energy business.

The company now expects to bring in between $10 million to $11 million for fiscal 2008, compared with the company’s previous guidance range of about $6 million to $8 million.

The company also noted that it has a backlog for its energy business through calendar year 2009.

WSI Industries said it will release its full year fiscal 2007 earnings on Oct. 23 after market close.

WSI Industries is a contract manufacturer specializing in the machining of complex, high-precision parts for industries, including avionics, aerospace and defense, and energy.

Shares of WSI Industries (WSCI) jumped 27.66%, or $1.43, to $6.60 at 12:24 p.m. ET. Shares of WSI Industries have been trading in the range of $2.71 to $7.15 for the past 52 weeks.

The world’s unquenchable thirst for energy continues to drive exploration companies to search for new sources of oil and natural gas. After hitting paydirt, those companies must be ready to put a cap on it, which is where T-3 Energy Services, Inc. (Nasdaq: TTES) plays an important role.
 
For investors, T-3 Energy has provided something of a gusher, with a one-month return of 34.3%, a three-month return of 21.7% and a 12-month return of 122.5%, according to Thomson Financial’s calculations. The stock hit a 52-week high Wednesday of $46.52, and in a rising stock market there has been little reason for it to fall back. That’s a huge improvement over T-3 Energy’s 52-week low of $18.04, seen on Jan. 30.
 
The driving question that investors are trying to answer is how much upside potential remains for T-3 Energy—can they expect a continuation of that gusher or will profits dry up to a trickle?
 
T-3 Energy was created in 2000 through the combination of Cor-Val and Preferred Industries. But the Houston-based company’s roots in the energy industry are deep, extending back for more than 25 years.
 
T-3 designs, manufactures, repairs and services the equipment used to drill and complete new oil and gas wells in both land-based and offshore operations. In an industry where parts failure is not an option, many of the big exploration and pipeline companies are customers of T-3 Energy; their operations depend on its valves, wellheads and other devices that are engineered to handle intense pressure of 15,000 pounds per square inch and beyond.

T-3 Energy has 18 manufacturing operations spread across North America. The company noted in its 2006 annual report that from April 2003 through March 9, 2007, it had introduced 43 new products as it places an emphasis on new-product development in a push to become a major original equipment manufacturer.

Shares of Energy Focus, Inc. (Nasdaq: EFOI) are rocketing after the energy-efficient lighting technologies company, formerly known as Fiberstars, Inc, said it will install its downlight system in a Wal-Mart Super Center and a Sam's Club in Cabo San Lucas, Mexico.

“By using our highly efficient lighting system, these Wal-Mart stores can expect to see significantly lower energy, maintenance and cooling costs over fluorescent, incandescent, and other traditional lighting technologies,” said Energy Focus CEO John Davenport.

According to the U.S. Department of Energy, lighting is the biggest energy expense for retailers, accounting for 37% of total energy use in retail buildings and more than 22% of electricity costs for the average grocery store.

The two Wal-Mart stores are part of Wal-Mart de Mexico, which includes 122 Super Centers, 78 Sam's Clubs and employs 142,000 people across the country. In 2005, Wal-Mart de Mexico net sales increased 13.7% to $15.4 billion.  

Shares of Energy Focus (EFOI) gained $1.30, or 23.21%, to $6.90 in midday trading.

 

Shares of Teton Energy Corp. (Amex: TEC) are rising today after the developer and producer of natural gas and oil reported that its Chief Financial Officer and Executive Vice President, Bill I. Pennington, resigned for personal reasons.

Teton said Mr. Pennington will actively work with the firm during the recruiting process. The firm said it has retained Preng and Associates, a Houston based executive placement firm, to conduct the search for a new CFO.

According to Teton, Mr. Pennington will join Teton’s board as an outside Director on September 14.

Shares of Teton gained $0.26, or 5.49%, to $5.00 in mid-morning trading Friday.

At the half-way point of 2007, Canada’s small-cap fund managers have extended their winning streak.

For the third consecutive quarter, the country's small-cap managers outperformed their counterpart large-cap managers, according to Russell Investment Canada's report for the second quarter ended June 30. (Based in Tacoma, Russell Investment Group says it advises institutional clients with total assets of over C$2.0 trillion. Russell follows 31 small-cap Canadian funds and 75 large-cap ones.)
              
Kathleen Wylie, Russell's senior research analyst, said in her review that the median small-cap manager returned 7.1% during the most recent three-month period, compared with the median large-cap manager return of 6.4%.
              
That is largely because Canadian small-cap managers won out by having a smaller weight in the broadly underperforming Canadian financial services sector. Small caps had an average of 14% in that sector, compared with 30% for large cap.
               
As well, small-cap managers on average had roughly 12% of their portfolios in the positive consumer discretionary sector, compared with only a 5% weight by large-cap managers.
              
Wylie noted that despite the rally in resource prices such as oil and base metals in 2005 and most of 2006, small-cap managers still lagged their large-cap counterparts.
               
"However, we're half-way through the year and I'm still more encouraged by the active management environment (among small-cap managers) now than I have been in the last couple of years when the market was dominated by resource stocks," she said. 

With last winter basically a no-show in much of North America, it’s no surprise that oil and natural gas prices fought a largely losing battle against warm weather.

As certain energy prices fell at various points during that time period, they also pulled down smaller oil and gas plays, leaving investors turned off. Add in service costs, rising debt levels, and Canada’s negative ruling on trusts late last fall, and it’s no surprise that smaller plays in the sector, as Acumen Capital Research notes,  “…continue to experience significant disinterest from the market.”

Yet on the other side of the equation, there are enough positives that some juniors may offer real potential for value investors.

Take Delphi Energy Corp. (TSX: DEE). With some 80% of production coming from natural gas, Delphi is in a position to profit should prices rise. But the bigger part of the Delphi story is its focus on long-term organic growth, built around a large number of development opportunities. Delphi plans to leverage these with a high-impact development program, working with what it says is a five-year inventory of defined and repeatable growth opportunities.

Delphi’s capability to achieve that goal is backed up by its track record. Over the last four years, Delphi has seen a 104% growth in production per share, 174% growth in cash flow per share, and a 60% growth in net asset value per share.

Key for a gas developer are land assets and the ability to put them into production, and Delphi scores high on both measures. Not only did it expand its undeveloped land by 63% to 86,062 net acres in 2006, it had a 90% success rate from its participation in 52 wells.

A gusher of positive news has sent shares of Gulfport Energy Corp. (Nasdaq: GPOR) sharply higher in recent weeks. Just as motorists have found that pump prices have remained well above $2.50 a gallon since spring, Gulfport’s stock price is showing no signs of dropping back into its former trading range.
 
In fact, Gulfport’s share price is sending its market capitalization right out of the small-cap arena. Still, there could be some buying opportunities if there’s a market pullback – or, more likely, profit-taking by the patient investors who stuck with it. 

Gulfport Energy is an independent oil and natural gas exploration and production company based in Oklahoma City. The company, founded in 1997, has its principal producing properties located along the Louisiana Gulf Coast, along with some exploration activity in the Canadian oil sands and a smattering of activity in Thailand. As of Dec. 31, 2006, the company had 23.2 million barrels of oil equivalent of proved reserves.

Until the Gulf Coast was ripped apart by hurricanes Katrina and Rita in 2005, Gulfport Energy was truly a small-cap stock, trading in the $2-$5 range. Then it began taking off, riding the wave of a production fall-off and soaring oil demand.
 
The global demand for commodities, especially petroleum products, has helped push Gulfport Energy out of its stock trading rut, seemingly for good. In May, the company was listed among the top 100 growth companies compiled by BusinessWeek. Just as the big boys in the oilfields have seen their profits soar along with oil prices, Gulfport Energy’s profit has increased 308%, on average, over the past three years, BusinessWeek noted.

Among the many ill effects of global warming are unusual and violent weather conditions. So there’s some poetic justice in the fact that many forces have combined to create a kind of perfect storm for Canadian Hydro Developers, Inc. (TSX: KDH), one of Canada’s leading renewable energy companies, and an undiluted, pure play on green energy.

The favorable conditions for Canadian Hydro Developers really began to find traction with the run-up in oil prices and electricity shortages following the lashing of New Orleans by Hurricane Katrina. Adding fuel to Canadian Hydro Developers’ fire has been former U.S. vice president Al Gore’s pushing of the global warming issue onto the world stage, along with the focus on the failure of the Kyoto Accord and the release of many books on climate change.

In turn, governments have stepped up support for alternative energy through subsidiaries, grants, and tax credits. Meanwhile, a system for trading emissions credits is rapidly evolving.

And sharing in the spotlight that has been focused in a surprisingly unrelenting way on global warming and the damage caused by fossil-fuel power production are green energy stocks like KHD.

Of course, as with most alternative energy companies, Canadian Hydro Developers comes with all the usual small-cap caveats and then some. Technology advances in fits and starts, and setbacks are inevitable. Government involvement and investment are still fairly integral, yet by definition often fickle and unfocused. And then there’s the long-term – and often delay-prone – nature of utilities.