Source: Penny Stock Detectives Junior Oil Firm Growing Five Times Annually The volatility in oil prices continues to be quite extreme. These volatile moves then tend to influence oil stocks, which obtain revenue from oil prices. Obviously, for the long-term investor in oil stocks, oil prices are one component, as is the quantity of reserves a firm has, and the potential for developing further resources. One method for longterm investors is to look at relatively smaller and younger oil stocks that can grow over time. Triangle Petroleum Corporation (NYSE/TPLM) is one of the more interesting oil stocks. It has both exploration and production operations within the Bakken Shale and Three Forks area of North Dakota and Montana. The company has over 85,600 net acres of land available, containing approximately 1.5 million barrels of oil as proven reserves. For the second quarter of 2013, which ended July 31, 2012, Triangle Petroleum reported production of 104,660 barrels of oil equivalent (BOE) compared to 62,700 BOE in the first quarter of 2013. Total revenue was $10.2 million for the current quarter, compared to only $0.6 million in the same period last year. The net loss improved massively to only $952,508 from a net loss of $6.3 million in the prior year’s quarter. Triangle Petroleum has over 180 drilling locations at its core location. According to the company, it is issuing guidance of 2,600-3,200 BOE per day for full year 2013, an annual growth increase of approximately five times. While oil prices do play a significant role in the value of oil stocks, how Triangle Petroleum is able to manage its exploration and production is extremely crucial to its success. Obviously, since entering the North Dakota basin in 2010, the firm is on a growth path that is quite fast. The company’s share price still trades at a forward price-to-earnings ratio of only 11.16 and price-to-book value of just over 1.45. If the growth rate can continue at the pace the firm is currently setting, then these valuations are quite compelling.
Chart courtesy of www.StockCharts.com Junior oil stocks can be quite volatile. After having a massive rally, the recent decline in oil prices is weighing on the stock. Considering the strong growth rate, I think we’ll see some investors start to re-enter Triangle Petroleum’s stock on such a pullback. One strategy would be to wait for the stock to form a base before accumulating shares, as I don’t recommend buying any stock when the shares are falling so hard. Catching a falling knife is a dangerous strategy. With oil stocks that are quite new and inexperienced, it takes more than just oil prices to drive the share price higher. Seasoned investors want to see that the management of these oil stocks is able to efficiently execute their development plan, and continue production without any major problems. While oil prices are beyond the control of management of these oil stocks, there are many variables they can control, namely costs. I would like to see several quarters of sustained growth and strong execution for this company. Also, we have a lot of geopolitical risks that may influence oil prices next year. Both of these issues are crucial to a sustained move in the share price for Triangle Petroleum and many other oil stocks.
Source: Penny Stock Detectives