Source: Penny Stock Detectives Massive Revenue Growth for this Junior Oil Stock The volatility in oil prices continues to be quite extreme. These volatile moves then tend to influence oil stocks, which make more money when oil prices are increasing. 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 long-term 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 86,000 net acres of land available; with potential to grow the level of barrels produced per day substantially over the next few years, according to the firm. (Source: December 2012 Investor Presentation, Triangle Petroleum Corp., accessed December 20, 2012.) For the third quarter of fiscal 2013, the company reported total revenue of $23.2 million, a massive increase from the same quarter last year in which the firm reported total revenue of only $3.4 million. Net income attributable to shareholders for the third quarter of 2013 was a profit of $992,886, compared to a net loss of $2.1 million the same quarter last year. (Source: “Triangle Petroleum Provides Operational Update, Financial Results Of Third Quarter Fiscal 2013, And Fiscal Year 2014 Capital Expenditure Budget,� Triangle Petroleum Corp., December 10, 2012, accessed December 20, 2012.)
The stock trades with a forward price-to-earnings ratio of 12.5, cash per share of $1.01 and just over 1.2 times book value. Considering the massive growth rate in revenue and earnings, the fundamental metrics appear reasonable. Junior oil stocks can be volatile due to operational issues or funding limitations. While oil prices do play a significant role in the value of oil stocks, the ability for Triangle Petroleum 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.
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. The stock had a substantial pullback from October to the middle of November. At this point,
the stock appears to be forming a base for a potential move up through its 200-day moving average. This level is approximately the 50% retracement from the low in June to the high at the beginning of October. Oil stocks can encounter resistance in this area. I don’t recommend buying any stock when the shares are falling. Catching a falling knife is a dangerous strategy. What I do suggest is adding this stock to one’s watch list, and looking for a breakout to the upside. This would indicate that other investors are attracted to oil stocks, such as this firm, which would most likely coincide with a strong move up in oil prices. 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 its 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