Oil prices were on the move this week after a pipeline shutdown in the North Sea. At the oil market's close on Tuesday, Brent crude was up 1.1% to $111.61 and WTI crude was up 0.3% to $90.86. Later in the evening, it was announced that Venezuela's Hugo Chavez had died. Venezuela is OPEC's fourth largest member in terms of production, but it's unclear how Chavez's death will affect the oil market. U.S. natural gas, meanwhile, remains stuck in the doldrums, down 0.3% this week to $3.53.
The top oil and gas stocks this week
1. This week's leader is Endeavour International (NASDAQOTH:ENDRQ), up 58% this week to $3.97. Endeavour has had a self-inflicted rough year and an even rougher month. Last summer, with the stock around $12, Endeavour announced a dilutive share offering and took on additional debt to purchase oilfield assets from ConocoPhillips in the North Sea. The stock dropped from a high of $12.82 to the share offering price of $7.50 and slowly continued falling.
On Feb. 14 at a price of $5, the company announced that a storm the previous week had damaged its well at East Rochelle and that it was halting operations there. At the same time, the company announced that it was hiring investment bank Tudor, Pickering, & Holt to pursue strategic alternatives. The stock immediately plummeted. You know it's bad when the brokerage that did the most recent stock offering downgrades the stock from "buy" to "neutral," which Global Hunter Securities did on Feb. 20.
Endeavour hit a low of $2.36 last week. The stock has since come back a bit, but with a large debt load, a $115 million credit facility due in October, and a damaged well, things don't look good for Endeavour. I'd pass on this one.
2. Second this week is InterOil (NYSE:IOC), up 14% to $77.68. Interoil is the developer of the massive Elk and Antelope natural gas fields in Papua New Guinea and has an LNG export facility to go along with it. In November, the government of Papua New Guinea announced that it would take a 50% stake in each of the oil fields, which should derisk the project somewhat. The company has been searching for partners to build its facilities and set a firm deadline of Feb. 28 for proposals. If the company can find a partner, and if the company can get its facilities built, there are huge opportunities to export natural gas to Asia. That's a lot of "ifs" for everything to work out, and short sellers have taken notice, with 12 million shares are currently sold short, or roughly 25% of the float. Investors should be careful.
3. And in third place this week is RigNet (NASDAQ:RNET), up 10% to $21.55. If you've never heard of RigNet, you aren't alone. The company had its IPO in 2010 and is a provider of remote communications services to the oil rig industry. Basically, RigNet provides the Internet to offshore oil rigs. The company has been growing somewhat steadily, with a CAGR of 16% since 2007. RigNet has also taken market share from industry leader Harris CapRock, a subsidiary of Harris (NYSE:HRS). In the third quarter, the company announced the acquisition of Nessco, which should further boost growth. While RigNet doesn't look particularly cheap with a P/E of 33 and EV/EBITDA of 9, its growth opportunities could warrant the high price. This is definitely one for the watchlist at the very least.