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Pennyperson (< 20)

Natural Gas: Where Bullish Dreams Go to Die

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December 29, 2010 – Comments (24) | RELATED TICKERS: DBLE , GST , REXX

One of my true passions is small cap natural gas & oil plays in real life.  I've just read a very interesting article that I think is worth a read; if you’re into natty gas like me -The link: http://seekingalpha.com/article/243179-natural-gas-where-bullish-dreams-go-to-die?source=qp_article

Even though I see some validity in this article; I still believe that small cap natty gas plays will be cycling back in favor in the first half of 2011. Companies like DBLE should get a gentle nudge. Gaster (GST) is surely in favor of hitting wet holes w/ 80.000 acres in the Marcellus Shale and some will swing north on pure technicals. But, I also recently added UNG to my caps list. However, (after much research) and after reading this article I’ve become undecided once again on NG. I guess where it goes nobody really knows.  

BTW – TMFBabo

On December 21, 2010, at 9:12 PM, TMFUltraLong wrote:

Pennyperson,

On a side note, make sure you let TMFBabo know that he dogpiled on your back into that stock =) (DBLE)

Fool on!

TMFUltraLong

Full article here:

http://www.fool.com/investing/general/2010/12/21/live-chat-with-the-fool-24-hours-of-foolishness.aspx

24 Comments – Post Your Own

#1) On December 29, 2010 at 3:08 PM, checklist34 (99.82) wrote:

rec for the title alone, poetic!

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#2) On December 29, 2010 at 3:15 PM, TMFBabo (100.00) wrote:

Lol, I saw that tidbit in the chat. 

How did I actually find DBLE? I scoured several oil and gas conference webcast sites, looked at every presentation with the audio muted, and determined DBLE was the most undervalued relative to its 1P (proved) reserves.  Market cap of $55M vs. proved reserves of $229.7M.  That's a more impressive discount to reserves than most other companies' proved PLUS probable reserves vs. market cap. 

I think the more likely catalyst for DBLE is development of its Niobrara acreage - 1 to 6 test wells will be drilled in July 2011.  DBLE's 70,000 net acres of Niobrara acreage are located in the Atlantic Rim, the Hanna Basin, and the Powder River Basin.  Furthermore, the acreage is believed to be in the oil window (most Niobrara wells have been liquids-rich from what I've seen).

Rather than have just 1 catalyst (higher natural gas prices), DBLE has pretty exciting developmental plays.  You could argue that many other gas plays have similarly exciting plays, but I have yet to see anything that equals DBLE's combination of massive discount to reserves and realistic developmental plays (when I say plays, the undeveloped Utah gas acreage is included with the Niobrara oil acreage).

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#3) On December 29, 2010 at 3:23 PM, Option1307 (30.52) wrote:

But, I also recently added UNG to my caps list.

UNG is not a good way to play natural gas (see here), that fund is going to zero eventually regardless of the underlying commodity price.

 

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#4) On December 29, 2010 at 3:27 PM, lemoneater (84.32) wrote:

I have SE as my natural gas play. I'm thankful for the generous dividend that helps me to be patient as I wait for share price appreciation.

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#5) On December 29, 2010 at 3:45 PM, Pennyperson (< 20) wrote:

.TMFBabo:

I couldn’t agree with you more about DBLE and its future. In that tidbit I said “management has set the stage to move this hidden gem back to northern territory”- I just didn’t go into detail.

I’ve followed DBLE for 2 yrs now and have owned the stock in the past, but, was tired of the sideway movement and sold it. However, I find myself ready to buy again for all the reasons you mentioned. 

I just need to be a patient fool this go around. =)

 And I like GST too.

 

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#6) On December 29, 2010 at 4:02 PM, TMFBabo (100.00) wrote:

I think it'll trade sideways until:

1. Gas goes a lot higher
2. They get good results from their exploratory wells in the Niobrara and eventually start horizontal wells with some nice EUR figures. 
3. Table Top Unit gets developed - This is at least 2-3 years away.  The Environmental Impact Study itself likely won't finish till 2012. 

I think #2 is most likely to occur first, but it still might be July 2011 or July 2012 until we see this catalyst occur.  I expect no major movement on the stock until one of these happens.  I've already bought in, so I'm now in wait-and-see mode. 

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#7) On December 29, 2010 at 5:03 PM, Teacherman1 (47.64) wrote:

I have added DBLE to my watch list with a start limit.

I like it, but I think it will come down some more, and I want to own it just a little cheaper.

I may get "antsy" and buy a little, but I think there may be an overall market correction after the first of the year, and could get it at a better price. If not, and I have to buy a little higher, that's fine. 

Thanks TMFBabo for drawing my attention to it with your "CheckMark". I need to pay more attention to "PennyP's" picks. He is a "prutty good picker".

It seems like a lot of these smaller E & P companies are finally making a move away from just Gas.

 

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#8) On December 29, 2010 at 5:23 PM, Pennyperson (< 20) wrote:

Option1307 (29.43) wrote: UNG is not a good way to play natural gas  

Option 1307 - Your'e Correct!!!! =) But, that's why I love fooling around in Caps. I wouldn't touch it in RL.

 

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#9) On December 29, 2010 at 5:33 PM, EnigmaDude (97.62) wrote:

PennyPerson, I like your logic. 

Also take a look at Kodiak (KOG) and Warren Resources (WRES).  Both were mentioned in a recent article about strong energy stocks under $10.

"Wells Fargo recently started coverage on KOG's stock with an Outperform rating ... 'We believe Kodiak is a Bakken pure play with an impressive growth outlook and attractive valuation" the Wells Fargo analyst wrote.

 

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#10) On December 29, 2010 at 5:49 PM, Pennyperson (< 20) wrote:

 EnigmaDude

I already nailed KOG this year =) and WRES is always on my mind.

 

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#11) On December 29, 2010 at 9:46 PM, SultanOfSwing (99.80) wrote:

Pennyperson,

What do you think about IVAN?  I have it as a CAPS short term swing after news came out on Dec 21 of a big nat. gas find in China.  I've done little fundamental DD here, just chart technicals.

SoS

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#12) On December 29, 2010 at 11:24 PM, Pennyperson (< 20) wrote:

#11) On December 29, 2010 at 9:46 PM, SultanOfSwing (99.33) wrote: Pennyperson. What do you think about IVAN?

Tenmiles calls it IVAN the terrible - TMFUltralong wants a cup of oil.

I think GREYGOLD  is on track. I'd say weave and bob your way through the maze and make your own call, like I did from a tech stand point and racked up a 25% gain.

With that said, I'll turn the table and ask you!!..what's your take on IVAN?

Will it turn out to be Ivan the terrible or David vs. Goliath w/ David/IVAN the victor?

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#13) On December 30, 2010 at 12:41 AM, dwot (99.87) wrote:

NG is a place I want to do more research.  I am getting the impression that they can do very well on a much lower price with the shale fracking process because there is simply so much gas available from this.

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#14) On December 30, 2010 at 2:34 AM, dragonLZ (89.48) wrote:

I have a funny story to share with you when it comes to NG plays. It's so funny, I cry tears how hard I laugh every time I think of it.

On Sept. 21, 2009, in a post about my real life portfolio, I said: After buying some CPE, I will now buy one or two of the following three: PQ, AHD, APL.

Here is what happened with all 4 stocks I mentioned at that time (AHD and APL are pure NG plays, and CPE and PQ are Oil and Gas):

CPE, price then $2.09, price now $5.93, Return +183%

PQ, price then $5.53, price now $7.37, Return +33%

AHD, price then $4.11, price now $14.70, Return +258%

APL, price then $7.06, price now $25.41, Return +260%

What's so funny? See it here...

Good Luck to All in 2011.

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#15) On December 30, 2010 at 11:48 AM, SultanOfSwing (99.80) wrote:

I'd say with commodities, hype often trumps fundamentals.  So w/ IVAN, I'm long for a short timeframe.

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#16) On December 30, 2010 at 1:15 PM, Pennyperson (< 20) wrote:

A few final thoughts: 

I agree w/ Dwot that there is so much NG in the U.S. and we produce the commodity so cheaply, I don’t see a move up in price in the near term. I believe T Boone has it correct too. We need to figure out what to do with NG so we don’t have to depend on foreign oil so much.

In the case of IVAN “sad to say” they’ll find a way to suck every last drop of oil out of anywhere they can find it; which is unfortunate for good ole Mother Earth. IVAN or not someone will.

There will always be a demand NG and there will always be small cap E & P’s looking for more. It appears “Teacherman’ made a correct call - gas companies are expanding into oil to become more diversified like SD. TMFBao is correct in saying “we don’t need a move up in NG prices for companies to become profitable and have “huge” upside potential. 

I made a comment once on a PDS pitch – Oil won’t stay in the $60 a BBL forever. Well, neither will NG.  

With that said – there are many companies that are mentioned in this blog and many more out there. So, fool on people and sniff them puppies out because the upside rewards when you find a good one can be substantial as you can see with Dragon’s picks.

 

PP

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#17) On January 03, 2011 at 4:52 PM, dragonLZ (89.48) wrote:

Penny, have you noticed that RT was up 10% today? :)

p.s.

Sorry for the off-topic comment.

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#18) On January 03, 2011 at 8:34 PM, Ticker007 (< 20) wrote:

Dragon - where did that come from? Gees....

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#19) On January 05, 2011 at 11:43 AM, dragonLZ (89.48) wrote:

Oops, sorry...I thought pennyperson and pennystockguy were the same account:

http://caps.fool.com/Pitches/Pitch.aspx?source=isesitlnk0000001&pid=5208591

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#20) On January 05, 2011 at 12:09 PM, Pennyperson (< 20) wrote:

Well, guys do you still think RT is coming back? And no I'm not the "penny guy"  =) But, he's a good picker....

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#21) On January 05, 2011 at 12:44 PM, dragonLZ (89.48) wrote:

What do you mean "is RT coming back"?

RT is already back big time. It used to be $1 back in March of 2009, now is at $14.

It's up 50% since I picked it for my value portfolio (ValueDragonStyle) 5 months ago.

p.s.

I don't think this is really off-topic as I'm sure Ruby Tuesday uses natural gas in their kitchens... :)

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#22) On January 05, 2011 at 5:45 PM, Pennyperson (< 20) wrote:

dragonLZ

Let me revise that...is the run that RT's had on it's way back up about to .....sloooow down.

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#23) On January 06, 2011 at 10:29 AM, dragonLZ (89.48) wrote:

Penny, I wish I knew. I'm not really that good. :)

All I know is that RT is up another 8% today, and is a $15 stock now.

p.s.

I think RT is easily a $25 stock, but is that going to happen before RT goes down to $11 - $12 again, I have no idea...

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#24) On February 08, 2011 at 7:09 PM, TruffelPig (< 20) wrote:

What is with LINE in this context? Or are they too oil oriented to be considered in this thread?

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