Knobias Clip Report (05-19-2008)
Submitted By Knobias ClipReport
Small Cap Oil Names See Increased Action on Crude Speculation
Monday’s session saw an early beginning to the age old adage of “Sell in May and Go Away”. The theory relates to the Memorial Day weekend when summer vacations begin for many in the financial industry, taking with them much of the volatility and redistributing much of their holdings into treasuries and money accounts to marinate until their return from the holidays.
With oil prices rising in anticipation of the holiday, crude saw new highs even with OPEC support of increasing oil production by 300,000 barrels a day. Also holding the price higher was the potential demand for energy to rebuild and repair the earthquake damage in China.
The higher price of oil had many looking at solar names again, but the sector was mixed with SolarFun higher by 11% ahead of its earnings report on Wednesday while China Sunenergy was down by 8% ahead of their earnings report on Tuesday. The Claymore solar ETF (TAN) was higher, but only marginally at .5%.
It seems with the higher price in crude, investors were shunning the alternatives and going straight to the sources but of lesser quality. Many small cap oil names haven’t seen the rallies that oil, solar, and related industries have seen, but that has reversed in the past two trading days.
Names such as Magellan Petroleum Corp (MPET) and Blue Dolphin Energy (BDCO) were seeing increased action on the rise in crude. MPET is engaged in the sale of oil and gas and the exploration of their reserves. The Company’s main asset is a 100% equity interest in Magellan Petroleum Australia Limited.
MPAL’s major Australian assets are two petroleum production leases covering the Mereenie oil and gas field (35% working interest), three petroleum production leases covering the Nockatunga oil field (41% working interest) and one petroleum production lease covering the Palm Valley gas field (52% working interest. In Canada, the Company has a direct 2.67% carried interest in the Kotaneelee gas field in the Yukon Territory of Canada.
The Company reported earnings last week of $1.7 million ($.04 per share) of net income on gross revenues of $9.5 million in its fiscal third quarter ended March 31, 2008, as compared to net income of $286,000 ($.01 per share) on revenues of $6.8 million in last year’s third quarter. The Company was able to absorb an ATO settlement of approximately (AUS) $14.6 million. The charge resulted from tax discrepancies in Australia.
Blue Dolphin also reported earnings this past week. The Company announced a net loss of $525,374 on revenues of $678,537 compared to a net loss of $319,188 on revenues of $854,996 for the three months ended March 31, 2007. Even though the latest earnings weren’t impressive, the shares have still caught a bid and were up 6.6% on Monday.
MPET shares were up over 20% on Monday after gaining 11% on Friday. With the price of crude continuing, speculators will continue to bid these higher trying to scrape every bit of return until a prolonged dollar rally or other catalyst brings the price of oil back in line with fundamentals. With that in mind, investors would be wise to watch.
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