Enerplus building a big base

Jun 2nd, 2010 – 1 Comment

If it catchs a bounce off $22 you could catch a ride towards $25.00. If it breaches $22 look for support at $21 and then at $20.


About the Author

Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


Read the author's full profile.


Further Research

Read more about Energy.


 

Enerplus

Hi Lou,

Your opinion about Enerplus  would be highly appreciated.

Wish you all the best.

Zoro

Hi Zoro,

Enerplus Resources Fund (ERF.UN  TSX) is an oil and gas trust producing 86,000 barrels of oil equivalent per day made up of 57% natural gas and 43% oil and natural gas liquids. The reserve life index is 10.9 years and the yield on the units is 9.6%. At this point  investors are attracted to the opportunity because of the cash distributions more than the capital gains potential. But with the trust planning to convert to a corporate structure by the end of 2010 there could be some growth potential.

erf

The three year chart illustrates the pressure that pushed prices down from the highs of $50 back in June of 2008 to the March 2009 lows below $17.50. The units have been trading in a range with support at $22.00 and resistance at $25.oo since June of 2009.  The chart, as we used to  say in Alberta, ain’t no oil painting but it does seem like a large base has formed between support and resistance. My old friend Steve Kalil taught me to look for base building because the bigger the base the better the case for an investment.

 

 

erf2

The six month chart provides a close up of  the range bound trade between lows of $22 and highs of $25.00 . I would suggest that you watch $22 like a hawk given that the market for natural gas gets weaker this time of year and ERF gets slightly over 50% of its daily production from that source. If it bounce s off $22 you could catch a ride towards $25.00. If it breaches $22 look for support at $21 and then at $20.

With the conversion to a corporate structure with a focus on growing reserves and production while still providing income for distributions to shareholders ERF has the potential for a breakout as we come into the late summer early fall of this year. The company plans on spending $425M in capital expenditures during 2010 some of which will be used to develop and grow its natural gas production on its land base in the Marcellus Shale region of Pennsylvania.

Happy Capitalism!

Categories: Energy
Content © Relentless Economics - Charts courtesy Stockcharts.com - Employees Entrance - Optimization Media