Our view on PetroHawk (HAWK)
02-12-07: Some of you have requested our opinions on PetroHawk Energy Corp. (HAWK). After having the opportunity to study the company, we are cautious optimistic on the stock. We will post our thoughts on the other stocks in the coming weeks. We hope this helps with your investment matters. Thanks again for your continued feedback.
PetroHawk Energy Corp. (HAWK) – HAWK engages in exploration of oil and natural gas in North America. The company is headquartered in Texas. As with other energy stocks, this company will trade in tandem with commodity prices. If oil prices and natural gas remains high, the stock will likely do well. The recent recovery of commodity prices has pushed this stock up to the $12 range.
Trading a few points below its 52 week high at $12 per share, our view is the stock near long appreciation is limited. Long term view is too difficult to call. Looking over the company’s 2007 outlook, which is available on their website, the company is expecting to spend less in 2007. However, another interesting statement that got our attention is, “For 2007, approximately 65% of expected production is hedged. The floor for hedged production averages $7.22/Mmbtu for natural gas and $63.05/Bbl for crude oil”. This futures contract could end up hurting the company.
The bottom line is if crude oil and natural gas prices continue to climb, HAWK will do well. Our take is HAWK is a bit on the risky side at $12 per share. Our main reason for this view is oil has already climbed to the high end for the year. Since we expect commodity prices to trade in the $50-$60 per barrel in 2007, our view is there is not much upside from this level. On the contrary, if you believed commodity prices will head higher, then HAWK at this level is cheap.
