We will be at Enercom next week visiting three of our investments

We are making the annual pilgrimage to Denver’s Enercom next week.   Dozens of CEOS and top management from mid to small market oil and gas companies pitch the investment merits of their companies to the buy side.  There is also a lot of commerce between buyers and suppliers of oil and gas services.  This year there are three companies we are particularly interested in hearing from and talking to in the break out sessions.  We have big investments in two of them and just lightened up in a third but are interested in trading back  to a full position.  Timing couldn’t be better for this conference as after being the best performing sector in the first part of the year, the energy sector has rolled over and been one of the worst performing ones lately.  This smells like opportunity.

Atlas Resource Partners, LP., ARP: This MLP pays almost 12% per year and has the good judgement to make monthly payments as opposed to quarterly.  It’s a controversial investment.  That’s why the yield is so high.  The bear case is that the Company doesn’t earn its dividend but instead maintains it from continual capital raises.  There is some element in truth to this about most MLPs since they pay out in the form of tax advanced dividends almost all of their earnings, the only way for them to grow is to raise additional capital either through debt or follow on equity offerings.  I heard ARP speak last year and have been watching it for some time.  I was very impressed with their CEO Edward Cohen at last year’s Enercom.  He made past shareholders a lot of money.  Mr. Cohen reminds me a bit of Richard Kinder and he has always done right by his shareholders.  I’d like to hear if Eddie is thinking of buying back his two MLPS and rolling them into the General Partner as Kinder just announced sending the stock skyrocketing.  Atlas Energy, Atlas Pipeline, and Atlas Resource Partners looks like a very small version of Kinder Morgan with its own  iconic leader at the helm.  As you know we like to invest where management is willing to buy stock with their own money.  In this case, we also have a very successful hedge fund manager owning large amounts of stock as well.  That’s a good vote of confidence.  I do have to admit I like the 12% dividend while waiting.

Corelabs, CLB supplies reservoir optimization technologies used to increase total recovery from existing fields. Their services enable E&P companies to optimize reservoir performance and maximize hydrocarbon recovery from their producing fields.  Corelabs is working in 50 countries.   The stock is down from $220 in April to about $145 where we purchased it recently.  What brought it to our attention though was the CFO’s purchase of  $1,000,000 worth of stock shortly after last quarter’s earrings.  CFOS’s are notoriously good insiders to follow and in a market where not many insiders are stepping up, this stood out to us.  It’s a complex business and with offshore drilling losing lustre to shale plays on shore, there is some risk here.  That’s one questions I’m sure I’ll ask if no one else addresses.

The last company we own shares in is Carbo Ceramics, CRR.  CRR makes a carbon coated pellet used in fracking.  The stock recently plummeted when Rosetta Resources said  that it was changing the completion design in the Eagle Ford wells to sand from ceramic proponents.   Carbo Ceramics stock plummeted from $14.59 to below $105.  That’s after already dropping from a lifetime high of $156 just back in June.   Whether this is an over reaction or just a great buying opportunity remains to be seen.  We jumped on the stock for a trade when we saw two insider step up and take advantage of the price swoon.  Admittedly these are not giant purchases but still a vote of confidence.  We soon sold most of our position for a nice profit but this is one I am very interested in hearing what they have to say about Rosetta Resource’s comment.  It’s a critical moment for CRR as they are essentially a one product company.

We will be blogging daily from the conference Monday thru Thursday.    Its always exciting to me to visit trade shows and conferences not just for who you want to see but who and what you didn’t even know you’d find.  Stay tuned for more.