Insiders Snap Up 9 Natural Gas and Oil Plays in Buying Rampage; What Are They Buying?

By Michael Brush
Exclusively for InvestorIdeas.com
Novermber 20, 2008

Amidst all the gloom and doom that permeates the investing world now, there comes a ray of hope for bulls. Insiders are back in the market buying big time over the past few weeks.

They’re snapping up large amounts of stocks in several sectors – but they have been notably keen on energy companies with exposure to natural gas production in North America.

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This makes sense, because even though the prices for energy have fallen off a cliff, one raw fact about natural gas hasn’t changed. There are inherent shortages in North America. So if and when economic growth resumes, companies that have exposure to the upward price moves in natural gas that result should have a performance edge.

Much of the big buying has occurred at limited partnerships that are now paying out hefty dividend yields because their stocks have fallen so much. With government bonds trading so low because of worries about deflation, these yields really stand out – and they provide enticing returns for income-oriented investors.

Here’s a look at nine natural gas and oil companies that insiders have been snapping up in significant amounts.

NuStar GP Holdings (NSH)

The company: NuStar handles storage, transportation and marketing of crude oil and refined products in the U.S. as well as Canada, Mexico, the Netherlands, and the UK.

The buying: Insiders bought an impressive $9.1 million worth of stock in the past month, and $6.1 million in the five months before that. This is significant, because NuStar is relatively small, with a market cap of just $736 million.

The key stats: At $16 a share NuStar pays out a healthy 9.7% dividend yield, and trades for just 1.3 times book value.

Encore Energy Partners (ENP)

The company: Encore Energy develops and produces oil and natural gas properties in the U.S. in Wyoming, Montana, and Texas, where it has holdings in the Permian Basin.

The buying: Insiders bought $400,000 worth of stock in the past month, and $1.9 million worth in the five months before that. This is a significant amount because Encore is relatively small, with a market cap of just $384 million.

The key stats: Encore pays a 20% dividend yield.

Targa Resources Partners (NGLS)

The company: Targa is a limited partnership that gathers, processes and sells natural gas in Texas and Louisiana.

The buying: Insiders bought $908,000 in the past month and $1.8 million in the five months before that. This is significant, because the company is relatively small with a market cap of just $447 million.

The key stats: Targa pays a 20% dividend yield, and it traded recently for just .7 times book value.

NGP Capital Resources (NGPC)

The company: NGP Capital Resources is a closed end fund that invests in small companies in the oil, gas and coal sectors.

The buying: In the past month insiders bought $724,000 worth of stock. This is a significant amount because the company is so small. It has a market cap of $197 million. Insiders have a decent track record of seeing gains after they buy.

The key stats: NGP Capital Resources pays an 18% dividend.

Petrohawk Energy (HK)

The company: Petrohawk Energy Corporation develops and produces oil and natural gas in North America. It has extensive holdings in Louisiana, Texas and Aransas, including in the Fayetteville Shale.

The buying: In the past month, insider bought $414,000 worth of stock in the $15 range, or around current levels.

The key stats: The company trades at book value, and pays no dividend.

Willbros Group (WG)

The company: Willbros provides engineering, construction, and specialty services to oil, gas, and petrochemical industries worldwide, including in the U.S. and Canada.

The buying: In the past month insiders bought $993,000 worth of stock, and they purchased $2.4 million in the five months before that. This is a significant amount at such a small company, with a market cap of just $320 million.

The key stats: Willbros trades at just .7 times book value. It pays no dividend.

Tetra Technologies (TTI)

The company: Tetra is an oil and gas services and production company that operates worldwide, including in the US, Canada and Mexico.

The buying: In the past month, a senior vice president bought $748,000 worth of stock at around $5 a share. The stock typically goes up 23% in the six months after he buys. You can probably still get a better deal than him right now.

The key stats: Tetra trades for just .7 times book value.

Rosetta Resources (ROSE)

The company: Rosetta Resources buys and develops oil and gas properties in North America. It primarily operates in California, the Rocky Mountains, Texas, and the Gulf of Mexico.

The buying: In the past month insiders bought $816,000 worth of stock, and $229,000 worth in the five months before that. A cluster of insiders purchased, and many have decent records. The stock tends to go up 14% in the six months after they buy, according to Thomson Financial.

The key stats: Rosetta Resources trades for half of its book value.

Environmental Power (EPG)

The company: Environmental Power develops and operates renewable energy production facilities in the U.S. which make methane-rich biogas from agricultural and food industry wastes.

The buying: Insiders bought $102,000 worth of stock in the past month. That may seem like a small amount, but it’s a significant amount since this is a tiny company with a market cap of just $5.8 million. Insiders have a record of buying ahead of 20% advances.

The key stats: Environmental Power has a lot of debt, negative cash flow, and minimal cash.

The bottom line: As highly cyclical plays, energy companies should bounce back strong in an economic rebound – whenever that happens. Insiders are saying these are some of the best ones to own in anticipation of a turnaround.

Disclaimer
At the time of publication, Michael Brush did not own or control shares in any of the companies listed in this column. Mr. Brush is an independent columnist for this web site. For more on Insiders Corner disclosure, see the disclosure section in About Insiders Corner: http://www.investorideas.com/insiderscorner/. InvestorIdeas.com Disclaimer: www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not affiliated or compensated by the companies mentioned in this article.

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