4 Energy Stocks on My Wish List for 2012
I'm not particularly big on New Year's resolutions, but I do like the idea of mapping out a plan for the New Year, be it for investments or otherwise. 2012 proves to be no exception, and I have laid out four stocks I plan to monitor closely and potentially buy next year.
EnCana (NYSE: ECA)
I recently considered buying this stock, but ultimately decided it wasn't exactly what my portfolio needed at this exact minute. However, I'm on the lookout for a rebound stock in 2012, and I'm pretty sure this Canadian exploration and production company is it.
At the time of this writing, EnCana's shares are down almost 35% from the beginning of the year. Currently trading a dollar above its 52-week low of $17.64, I think EnCana is pretty compelling right now.
The company is debt-laden -- make no mistake, things are not perfect here -- but recent asset divestitures will help to turn things around. The company is on track to realize $1 billion to $2 billion in asset sales by the end of the year.
Going forward, EnCana will reduce capital aimed at its dry gas properties that produce mostly methane, and target its liquids-rich properties instead, an approach that's supported by EnCana's sale of its Barnett Shale operations, the big methane play near Dallas.
Finally, EnCana has hedged half of its dry gas production at a price of $5.75 until the end of 2012, instead of the less than $4.00 it's currently trading for. That's good news for a company that sees 50% of its production portfolio come from U.S. natural gas.
Kodiak Oil & Gas (NYSE: KOG)
I'm picking Kodiak as my growth play for 2012. The company just added to its acreage in North Dakota's lucrative Bakken Shale. The purchase adds 19.7 million barrels of oil equivalent to the company's proven reserves. Pipeline facilities were included in the deal as well.
Kodiak has performed well against the S&P this year:
Though past performance is no indication of future success, Kodiak is hitting its stride and has plenty of room to run in 2012.
Kodiak expects to finish the year with production levels reaching 17,000 barrels of oil equivalent per day. The company expects that number to increase to 30,000 BOE/day by the end of next year. In order to make that happen, it is allocating $550 million to drilling and completing 73 wells in the Williston Basin, and setting aside an additional $10 million for other potential acreage acquisitions.
SandRidge Mississippian Trust (NYSE: SDT)
This trust is an investment vehicle brought to you by Tom Ward and the other folks at SandRidge Energy (NYSE: SD) to exploit the tremendous potential of the Mississippi Lime region that sits underneath the ground of southern Kansas and northern Oklahoma.
Buying into the trust is akin to buying into an individual well and being paid royalties based on that well's performance. That's how the trust operates, but it's where it operates that is the crucial factor. The Mississippi Lime play is thought to be 52% to 55% oil. Given the porous nature of limestone, it is also cheaper to drill here compared with other unconventional plays in the U.S. SandRidge has drilled 147 horizontal wells total in the play, almost half of all the horizontal wells drilled in the Lime so far. The company has also identified 4,000 more drilling locations over its acreage.
New wells mean a lot; per the trust's initial agreement, parent SandRidge must bring 123 wells on line in the play between December 2010 and the end of 2015. The trust has a 50% stake in those new wells, which means that royalties and distributions to investors will continue to grow.
Buying into a trust can be a complicated matter when tax season rolls around, and it may not be right for your portfolio, but there is a significant upside to this investment in the near future for anyone who doesn't mind the extra hassle.
SunPower (Nasdaq: SPWR)
It seems like the tide of acceptance is starting to turn for solar companies. Berkshire Hathaway's recent purchase of a solar power plant garnered headlines, as did Total's $1 billion investment in SunPower.
Short interest in SunPower decreased 11% from the middle of November until the end of the month, another sign that investors are at least considering changing their tune on solar. SunPower is tops among solar stocks for efficiency, but it also works to keep system installation costs down, allowing the company to offer lower overall costs in crucial markets like California, New Jersey, and Japan.
It is the energy stock I'd like to add to my portfolio in an effort to begin to balance out all of the oil and gas companies.
The bulk of my research in the coming weeks will focus on these four stocks. As the year unfolds, I will begin to further develop my buy and sell theses for these companies and eventually make purchases if I like what I see in the market. Like any investor, I am open to other investments next year and will keep my eye out for great ideas like The Motley Fool's Top Stock for 2012.
Got a few stocks on your 2012 wish list? Fill in your fellow Fools in the comments section below!