5 Best Energy Stocks of the Week

This Week in Energy

• US production still increasing, gasoline stockpiles high

• Libya exports coming back online

• Concerns over losing Iraqi production waning

Energy sector down 1.85%: Global oil supplies are on the rise, sending prices lower

This Week’s Top 5 Energy Performers

NYSE: PE up 4.95%

NASDAQ: AHGP up 3.88%

NASDAQ: MRD up 3.84%

NYSE: CXO up 3.82%

NYSE: SUSP up 3.48%

Parsley Energy

Why is it up this Week?• After its Initial public offering back in May,

several analyst groups initiated coverage this week. Most of which is favorable–Most Recent: RBC Capital rating of sector

perform with a very favorable price target

Parsley EnergyWho is it?Parsley is a exploration & production company in the heart of the Permian Basin

Pros: • Location, the Permian is a great place to be right

now• Lots of potential well sites to grow production

Cons: • Only getting 53% oil in production, low compared

to other Permian players• Priced at extremely high premium (TEV/EBITDA=

23.9x)

Parsley EnergyDoes this week matter in the big picture?

Price targets and analyst opinions won’t change this business, nor the long term outlook for this stock

What really matters right now is whether the company can grow production, so watch for earnings reports and conference calls to get a better picture of guidance

Alliance Holdings GP

Why is it up this Week?• Analysts at Raymond James seem to really

like this coal stock, giving it a strong buy rating and a price target of $77.00– Price as of end of week: $68.87

Alliance Holdings GPWho is it?General Partner of Alliance Natural Resource Partners, just about the only coal company in America that is actually making money today

Pros: • Reducing costs while increasing production• Squeaky clean balance sheet• Raising distributions

Cons: • Coal is a tough place to be, coal prices are

weak from oversupply• Long term outlook for coal in US in decline

Alliance Holdings GPDoes this week matter in the big picture?

Price targets and analyst opinions don’t really mean much, but…

ARLP is slowly gaining market share thanks to its low cost production in the Illinois Basin region, which is leading to higher distribution payments at the General Partner

Memorial Resource Development

Why is it up this Week?• After its Initial public offering back in June,

several analyst groups have initiated coverage with strong buys

Memorial Resource Development Who is it?General Partner of Memorial Production Partners, a Natural Gas producer with acreage in the Rockies, East Texas, and Louisiana

Pros: • Lots of room to grow production (up 54% since

Q1 2012) • E. Texas & Louisiana acreage in region with high

demand & lots of infrastructure to get it to market

Cons: • 1 year decline rates very high (approx. 65%), very

challenging for E&P company structured as a MLP

Memorial Resource Development Does this week matter in the big picture?

Price targets and analyst opinions won’t change this business, nor the long term outlook for this stock

Investors in this company need to worry more about company growing production to cover its high decline rates and that the MLP can cover its distributions

Concho Resources

Why is it up this Week?• Several Analysts have increased their 2014

earnings estimates for Concho thanks to better than expected production growth– Earnings for FY 2014 increased from $4.31 to

$4.35 per share

Concho ResourcesWho is it?Exploration & Production company focused solely on the Permian Basin

Pros: • Strong acreage position in one of US’ best shale

formations• Production growing fast (up 23% y-o-y)• Strong cash operations compared to many small

E&P companies (operational cash flow covers 80% of capital expenditures)

Cons: • High premium for shares (P/E ratio of 49.3x)• High level of debt (debt/capital =49.4%)

Concho ResourcesDoes this week matter in the big picture?

Increased production leading to better than expected earnings is a good sign

What really matters for Conch in the future is to be able to cover its capital expenditures with cash flow from operations

Susser Petroleum Partners

Why is it up this Week?• Ummm…good question– No press releases, no analyst rating changes, no

tangible changes to the business

– Somebody might give some technical analysis explanation, but it’s just up, end of story.

Susser Petroleum PartnersWho is it?A Master Limited Partnership specializing in wholesale distribution of refined petroleum products, mostly supplying retail stations owned by Susser Holdings

Pros: • Long term fee based contracts provide stable

cash flows• Strong distribution coverage (coverage ratio=

1.22x)• Well financed General Partner (Energy

Transfer Partners)

Cons: • Very low margin business (gross margin 1.4%)• Priced pretty high for MLP (price/distributable

cash flow=19.46x)

Susser Petroleum PartnersDoes this week matter in the big picture?

Nothing happened. So how can that have any tangible impact on the long-term impact of the company?

How You Can Profit from America’s Energy Tax

“Loophole”…