Newsletter Watch: McMoran Exploration Co.
"It's time to play with the big boys in the Gulf of Mexico," says Eric Roseman, a long-standing expert on resource companies. Roseman focuses primarily on markets such as metals, energy and agriculture through his Commodity Trend Alert newsletter.
Roseman’s latest speculative buy is a Gulf of Mexico oil and gas exploration company that has recently seen "massive insider buying."
"There's not much to like about a company that's struggling to make money; but in reviewing McMoRan Exploration Co. (NYSE: MMR), I was stunned to see a massive cluster of insider buys," he says. "You don't buy several million dollar's worth of stock if you think the company is heading down the tubes."
Roseman says that what peaked his interest was the amount purchased in relation to the company's small market value. When Roseman sees this sort of buying, he says he’s immediately interested.
As of Dec. 31, 2006, he says, the company owned or controlled interests in approximately 400 oil and gas leases in the Gulf of Mexico, and onshore in Louisiana and Texas covering approximately 370,000 gross acres.
"MMR trades at a multi-year low, is down a hard 23% over the last 12 months and posted a huge third-quarter loss for the September period. Usually, this sort of financial bleeding would leave me running for the door," he says.
Roseman suggests there's something going on at the company now.
"Based on my stock-screen analysis and contrarian sentiment indicator, this depressed oil and gas exploration concern is worth your time, effort and of course, investment dollars," he says. "The average insider purchase in the United States is just $50,000. That's a pretty small amount of money if you're an executive or director of a publicly-traded company. But that's the figure.”
"At MMR,” he says, “four insiders, including the company's co-CEO bought a total $8,886,000 worth of company stock earlier this month at an average price of $12.40 per share, or 7.3% above the current price of $11.49.”
Roseman says the co-CEO alone purchased $1.3 million dollars' worth of MMR on Nov. 2 — a few days following the company's poor Q3 earnings were released. He says investors can actually see the large volume spike on the MMR chart above for that day.
"What is the catalyst?" he asks. "On November 14, MMR successfully financed a $300 million dollar senior note issue primarily for the financing of its recent takeover of Newfield Exploration, which will significantly boost its Gulf of Mexico oil and gas revenues.”
Roseman thinks this is the reason why executives and directors at the small energy company have gone mad-dash crazy with an $8.9 million dollar insider-buying binge this month.
"Despite a universe of hundreds of natural resource stocks out there, none offer this sort of compelling insider buying — none. That's especially the case right now in the oil and gas sector, where soaring costs have seriously hurt earnings for most companies, including MMR,” Roseman says. "MMR insiders are all clustered at the same time and at the same price in a span of just a few days; that tells me earnings are going to turn around in a big way over the next few quarters. It also means we're buying."
Shares of McMoRan Exploration (MMR) closed at $12.64 on Thursday. Over the last 52 weeks, shares have ranged between $10.70 and $17.93.
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