Monday, July 23, 2012

Short Selling this Independent Energy Company

No new buy long stock picks this week, but only a short sell on Noble Energy. This week I highly suggest standing aside on buying into any new long positions, and also suggest lightening up on long positions for the time being.

Major resistance for the SP500 is about 1,388.87 right now. We could see a trading range on the SP500 between 1,388.87 and 1,344.50 for the next month or two and with the current global economy the way it is right now we could possible see a downside break of 1,344.50 and if so, we could be seeing some significant downside price moves that could last for some time and possibly wipeout a lot of equity.

I recommend extreme caution on going long at this time, and suggest selling stocks short. If Fed Chief Ben Bernanke keeps buying assets with his quantitative easing program then stocks could continue to grind higher but the risk reward on buying into quantitative easing is not favorable right now in our opinion. If you don't want to sell short and still want to try making money this week we suggest trading the forex, gold and oil markets and stay away from buying stocks or sell them short for now.

Zacks Investment Research reports that oil and natural gas exploration company Noble Energy Inc. (NBL) inked an agreement for sale with Unit Petroleum Company, a wholly owned subsidiary of Tulsa, Oklahoma based Unit Corporation (UNT). Per the agreement, Noble Energy will divest its non-core oil and natural gas assets in western Oklahoma and Texas Panhandle for an amount of $617 million. The agreement is expected to close in September 2012.

As per the deal, Unit Corporation will own 900 oil and gas producing wells on roughly 84,000 acres in the Granite Wash and Marmaton fields of western Oklahoma and Texas Panhandle. As of the effective date, net production was 60 million cubic feet equivalent per day with net proved reserves of approximately 250 billion cubic feet equivalent.

Output mix consists of 65% natural gas, 27% natural gas liquids, and 8% crude oil. Unit Corporation plans to finance the acquisition through issue of long term debt.

This divestiture was part of Noble’s previously announced strategic plan to divert capital and human resources to high value areas. The funds will increase its financial flexibility to execute international programs and enhance its horizontal crude oil operations in the DJ Basin in Colorado and Wyoming.

Noble Energy has been involved in high profile agreements which will aid in improving its topline position. The company in the first quarter of 2012 entered into a 15 year agreement with Israel Electric Corporation Limited (IEC) for sale of 2.7 trillion cubic feet of natural gas, which is expected to significantly augment Noble’s earnings prospects. Noble’s market share will likely be strengthened on the basis of this sales. This is slated to render its portfolio attractive to investors.

The company anticipates second quarter 2012 average sales volume to be around 224–232 thousand barrels of oil equivalent per day (MBoe/d), while it retains its 2012 guidance at 244–256 MBoe/d. The company expects natural gas and liquid production in the second quarter to be affected by a planned maintenance outage at the Alba facilities in Equatorial Guinea.

The Zacks Consensus Estimates for the second quarter and full year of 2012 is currently estimated at $1.21 per share and $5.93 per share respectively.

Noble Energy’s closest competitor is Anadarko Petroleum Corporation (APC). Anadarko has joined forces with an undisclosed party to develop Lucius oil and natural gas field in its deepwater Gulf of Mexico operations. The company sold 7.2% working interest of its Lucius play and in return received $556 million, which will allow the company to fund the development cost till the first phase of production.

Based in Houston Texas, Noble Energy is an independent oil and gas exploration and production (E&P) company, having high-grade hydrocarbon assets across the U.S. and several international locations. The company holds a Zacks #4 Rank (short-term Sell).

Sell Short Noble Energy - Ticker NBL

Sell Entry: 88.83 to 94.46

Stop-Loss: 98.97

Take Profit Areas: 76.12 to 75.32, 70.65 to 69.85, 59.18 to 58.52

Click here to review different investing trading software that scans analyzes stocks for different technical fundamental criteria, and low-risk high-reward trade pattern setups.

Click the Noble Energy Stock Chart Below for a Larger View