It’s been an interesting year or so for the oil and natural gas industry, as worldwide production of non-renewable energy has soared, causing prices to hit near-record lows.
Much of this volatility is owed to political turmoil among the world’s traditional oil producers. Tensions between OPEC member nations are extremely high, and it seems that some countries in the Middle East are willing to hurt themselves to prove a point to their neighbors.
Here at home, oil and gas production has skyrocketed over the past several years. In fact, in early 2015, the United States overtook Russia as the world’s biggest oil and natural gas producer. While domestic companies have also been hurt by low energy prices, it appears that oil and natural gas are finally on the way back up.
If the recent uptick in natural gas can continue, and if oil can find its home above $40 per barrel, domestic producers may be looking at brighter days ahead. As analysts become more bullish on these companies, we are seeing positive signs in earnings estimate revisions and high Zacks Rank scores.
One domestic producer to look at right now is Vanguard Natural Resources , which currently has a Zacks Rank #1 (Strong Buy). Before considering VNR for your portfolio, check out these five key facts we’ve highlighted.
1. Big on Acquisitions
Vanguard has a long history of acquisitions, and it is very proud of it. Since its IPO in 2007, the company has spent over $5.0 billion on acquisitions. In fact, the company has a dedicated business development and acquisition team that reviews between 125 and 150 potential takeover targets each year.
2. Diverse Holdings
Vanguard’s network is pretty wide ranging and includes holdings in 11 different states. The company operates in 10 basins/regions, with seven primarily producing natural gas and three that produce mostly oil. Its top three production basins are the Green River Basin (30%), Piceance (19%), and Anadarko (12%).
3. Credit is Tight
One thing that is concerning about Vanguard right now is its credit limitations. At the end of 2015, the company had used up $1.69 billion of its $1.8 billion borrowing base. On top of this, it is expected that this borrowing base will be reduced in April. In an effort to pay down some of its debt, Vanguard is currently looking to liquidate some of its assets in Oklahoma.
4. Industry News is Important
Right now, the domestic oil and natural gas market is waiting to see what happens with Linn Energy , one of the leaders in the industry. Linn has hit a rough patch, and the company has said that bankruptcy could be inevitable. Nevertheless, if the company can work out a plan to save itself, it could lift investor optimism and boost the entire industry.
5. Earnings Estimates Looking Good
Of course, we always want to keep an eye on the company’s earnings estimate revision activity. After crushing earnings estimates by over 226% last quarter, Vanguard hopes to continue its momentum this quarter, and over the past 30 days we have seen three positive revisions for the time frame. We have also seen four positive revisions for the company’s annual earnings over the past 30 days.
Vanguard Natural Resources is a company that has been grabbing headlines over the past few weeks. With a Zacks Rank #1 (Strong Buy), as well as an “A” in the weighted average VGM Style Score category, the Zacks metrics look solid for VNR right now. Of course, investors should still be as informed as possible before making any additions to their portfolios.
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