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3 Energy Companies That Could Make Big Moves Next Week

By Matthew DiLallo – Feb 21, 2014 at 9:20AM

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Earnings season isn’t over yet. Because of that LINN Energy LLC, SandRidge Energy Inc. and Kodiak Oil & Gas Corp could all make big moves on earnings.

Photo credit: SandRidge Energy

Next week is a big week for energy investors. While several big name companies will report earnings, I will be watching the reports of LINN Energy LLC (LINEQ), SandRidge Energy (NYSE: SD) and Kodiak Oil & Gas Corp (NYSE: KOG). I think all three could move wildly next week. Here's why.

LINN Energy: Merger could make it a mover
LINN Energy already let its investors in on a little secret, its fourth-quarter should be great. The company expects its production to hit its target range despite bad weather and it also expects to produce excess cash flow. Not only that, but it closed its major merger with Berry Petroleum right before the quarter ended. Because of this I wouldn't expect too many surprises out of the company when it reports on Thursday morning.

That said, what might cause the company's units to make a move is if LINN Energy exceeds these expectations. That's quite possible because there's ample upside in Berry Petroleum, which had been having a fantastic year despite the delays in closing the merger. If the company announces better than expected production thanks to Berry Petroleum, or more excess cash flow it could move the company's units higher on Thursday.

SandRidge Energy: Well results could make it a mover
Last quarter SandRidge Energy crushed estimates and raised its production guidance for the full-year. The stock promptly plunged as investors didn't like everything they saw. The company's production growth did slow and some of its exploratory wells were duds. While SandRidge Energy's stock fell for a while, that dip still turned out to be a solid buying opportunity.

 

Photo Credit: LINN Energy LLC

At the time investors still worried about the company's unfunded capital program as well as its lumpy well results. Most of those worries turned out to be for naught as SandRidge Energy recently ended worries about its funding by exiting the Gulf of Mexico. That sale enhanced its Mid-Continent growth strategy and set the company up for the future. Along with that sale the company updated investors on its plans for the year ahead so there shouldn't be too many surprises when SandRidge Energy delivers its fourth quarter and full-year results after markets close on Thursday. That said, don't expect shares to stay tame as investors can always find something negative, especially in its Mid-Continent drilling program, to spark a sell-off.

Kodiak Oil & Gas: Earnings could make it a mover
Bakken Shale focused driller Kodiak Oil & Gas is expected to join SandRidge Energy in reporting fourth quarter and full-year results on Thursday after the market closes. Kodiak Oil & Gas also isn't expected to deliver any surprises either as it already reported its production and reserve numbers. Those two numbers from the Bakken Shale really fueled a great year for the company.

We already know that production was up 103%, while proved reserves jumped by 77%. What we don't yet know is how much the company earned in the quarter. Earnings will become increasingly more important to Kodiak Oil & Gas as it's transitioning from growth at all costs to joining SandRidge Energy in having as close to a fully funded capital program as possible. That's one reason why the company's capital budget is decreasing in 2014, which is slowing its production growth to just 45% in 2014. While its growth is slowing, its earnings should start accelerating so investors should keep an eye on the bottom line to make sure it starts growing. If the company says otherwise, we could see shares dip.

Investor takeaway
Energy investors will want to be well stocked with coffee before Thursday as all three companies report earnings that day. While we already know that all three should report solid production, earnings and incidentals like well results could be what moves these stocks. A big dip could be a buying opportunity, so keep a watch for what happens.

Want a little less volatility?

Matt DiLallo owns shares of Linn Energy, LLC and SandRidge Energy. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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