Market Overview

4 Small-Cap Drilling and Exploration Stocks Up At Least 30% in 2012

Risk appetite has returned to the global financial markets in 2012, and this has helped the volatile energy sector to a 3.48% gain on the year thus far. Despite the positive year-to-date trajectory, the energy complex has severely under-performed the S&P 500, which is up 10.41% during the same time frame.

In light of persistently high oil prices and continued tensions in the Middle East, targeting energy names at current levels could lead to big profits if the sector can reverse its recent under-performance. With this trading idea in mind, I ran a simple scan looking for small-cap drilling and exploration names that are significantly outperforming the energy sector as a whole.

For traders who follow the philosophy of "buy high, sell higher," and "own the leaders," these names may be of some interest. The scan identified the 4 leading small-cap stocks in the drilling and exploration sub-sector, each notching a gain of over 30% in 2012. Below, Benzinga highlights these 4 names.

BPZ Resources (NYSE: BPZ) - This sub-$500 million company is showing significant relative strength versus the energy sector as a whole in 2012. The stock has added 43% year-to-date, although shares are down nearly 15% over the last 52-weeks. Nevertheless, it appears that a new uptrend has been established in BPZ and the stock could continue to rack up gains going forward. The stock is trading around 6% above its 50-day moving average and 22.52% above its 200-day moving average. BPZ is 15.94% below its 52-week high and 96.14% above its 52-week low.

Cheniere Energy (NYSE: LNG) - This company is engaged primarily in liquid natural gas-related businesses. Despite severely depressed natural gas prices, LNG has been soaring in 2012. The stock has more than doubled year-to-date, and is sitting near new 52-week highs. The company currently has a market cap of $2.80 billion. LNG shares are showing considerable relative strength with the stock trading 14.30% above its 50-day moving average and more than 69% above its 200-day moving average.

Venoco (NYSE: VQ) - This stock has jumped over 65% in 2012 after a January merger agreement was announced which valued the stock at $12.50. Under the agreement, Venoco's Chairman and CEO, Timothy Marquez, will acquire the company through a wholly owned entity, Denver Parent Corp. Despite the stock's big gain in 2012, shares are still trading significantly below the deal price of $12.50. Currently, VQ is trading at $11.19, suggesting that the market is not entirely convinced that this deal will close. A number of lawsuits have been filed on behalf of VQ shareholders alleging that the price and sale process were unfair, and these shareholders are opposing the agreement. Given the spread between the deal price and VQ's current share price, this stock may be of interest to arbitrage investors willing to make a bet that the merger does indeed close.

Vantage Drilling Company (NYSE: VTG) - This stock has risen more than 37% so far in 2012 and remains in a strong uptrend. Vantage is a small offshore drilling company which operates a fleet of drilling units. The company only has a market cap of $463 million and VTG shares currently trade at $1.59. Given the company's small size, the stock is quite sensitive to changes in drilling dayrates. The stock has been showing impressive relative strength, and is trading 5.61% above its 50-day moving average and 18.89% above its 200-day moving average. Eight brokers cover the name, and the median Wall Street price target on the stock is $2.23, implying significant upside to current levels.

Posted-In: Long Ideas News Small Cap Analysis Technicals Small Cap M&A Trading Ideas Best of Benzinga

 

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