MONEY MOVING INTO JUNIOR OIL EXPLORATION & PRODUCERS
It has been a long time since I remember a decent junior oil sector boom. I believe it was in the 90’s but the fact I cannot pinpoint a date shows how long it has been.
I expected us to see something emerge when oil broke through $80 last year and then again through $90 - but investors for the most part have ignored the sector. Quite possibly because many don’t follow the industry close enough to know what is fair value and what will drive growth.
The sector is getting harder to ignore. As oil broke through $100 recently - and has held there - I am seeing more money moving into the penny stock (micro cap) oil stocks on the TSX Venture. This is far from a sector rally but it may be a leading indicator of what we could expect in the second half of 2013.
I use a personalized daily screening tool to identify most actives on the TSX and TSX Venture. I cut out companies that don’t trade a certain dollar volume or number of trades and they must trade between 10 cents and three dollars.
This past week I have started to notice a lot of junior oil companies appearing in the top 10 or 20 of my daily filter for the TSXV. Rare Earth (REE) stocks started to show signs of life but oil has been the noticeable emerging theme.
Monday - EM (oil) PAW (ree) TSM (ree) PRD (oil) NFK (oil) QRM (ree) ZEX (oil) GWG (ree)
Tuesday - AOS (oil) RLE (oil service)
Wednesday - minimal oil or ree activity
Thursday - PIE (oil) CRE (ree) ZEX (oil) PTA (oil) BOE (oil) MVN (oil) INA (oil) SOG (oil)
Friday - POE (oil) ZEX (oil) PIE (oil) PTA (oil) NZ (oil) INA (oil) NVS (oil)
Like any junior exploration company, oil stocks are not without risk. However if you can find the better quality producing companies, they can do very well because oil companies tend to produce very significant cashflow.
Through the Ticker Trax newsletter we are following a couple very good junior (producing) oil companies. Of the small handful of oil companies I followed this past year, one was a takeover (Invicta), Manitok Energy Inc. (TSX: V.MEI, Stock Forum) $2.61 was a summer 2012 pick near $1.20, and Enterprise Group is a double from Q1/13.
I am actively looking for more opportunities in the oil sector during the remainder of 2013 as I believe this will be a popular theme that provides important diversification away from metals exploration.
This Monday I will be featuring a new 28 cent oil pick to paid Ticker Trax subscribers. This is a company that should generate in excess of $150 million in cashflow (after operating expenses) in 2014. It is a VERY promising microcap.
Stockhouse also has a new client - Zodiac Exploration (TSX: V.ZEX, Stock Forum) 9 cents - which has shown up several times this week for volume and percentage gain. They have an interesting story and just started moving off cash value. They have no production so it is higher risk exploration but with their plans to get a U.S. listing and the renewed interest in the sector, it should be a company worth researching.
www.zodiacexploration.ca
Corporate Presentation:
https://www.zodiacexploration.ca/upload/media_element/15/03/energy_resourceconf_apr2013_final_[forwebsite].pdf
Oil Outlook
Friday oil was trading slightly above $106 but even as economic data out of China, Europe and the United States was showing positive signs, there waslittle indication central banks would be willing to raise historically low interest rates. This should help support high oil prices.
Disclosure: Danny Deadlock does not own shares of Zodiac Exploration.