Penn Virginia Corp: Why Investors Love to Hate This Stock

Eagle Ford Shale-focused drillers Penn Virginia, Swift Energy, and Sanchez Energy have very high short interest.

Matthew DiLallo
Matthew DiLallo
Jul 17, 2014 at 1:28PM
Energy, Materials, and Utilities

Photo credit: Flickr/Janice Waltzer

The Eagle Ford Shale has fueled a remarkable rise in American oil production. It has also fueled gains to investors. That being said, there are three Eagle Ford Shale-focused stocks that investors really hate. In fact, investors are so worried the stocks of Penn Virginia (NASDAQOTH:PVAHQ), Swift Energy (NYSE:SBOW), and Sanchez Energy (NYSE:SN) will blow up, that these are among the most heavily shorted stocks in the sector.

There's certainly reason for investors to be afraid of going long on these stocks. Penn Virginia, for example, is up more than 200% during the past year. The debt-laden company could easily implode if oil prices go south. Likewise, Swift Energy and Sanchez Energy have used debt to fuel growth during the past few years. Again, this is causing concern among investors, especially as this debt is being used to fuel natural gas-focused growth.

All that being said, this hate might not be justified. Penn Virginia's oil-focused assets could make it a takeout target that would incinerate short-sellers. Meanwhile, increased natural gas exports could fuel gains for both Sanchez Energy and Swift Energy, as both companies own gas assets close to export facilities.

In order to help investors decide if the good might outweigh the bad, I created the following slideshow presentation. It takes a closer look at the reasons why investors are shorting Penn Virginia, Swift Energy, and Sanchez Energy, while pointing out why betting against these companies might not be a good idea.