Tourmaline Oil Corp. has aggressive growth targets and seasoned management

Jan 28th, 2011 – Comment

Management at TOU intends on ramping that up to 51,837 BOED by 2013 and 76,314 BOED by 2015

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Hello Lou,
How do you feel about Tourmaline ( TOU-TSX)
I have 400 shares and am contemplating another 600.
I think anything Mike Rose puts his hand to will thrive.
Is this a good time ?
I usually hold good stocks for years…I am patient….but an entry
point and the time of year for a good purchase would help me

Thank You,


Hi Audrey,

You have struck on one of the key wealth creation strategies. Invest with management teams who have been successful before. Michael Rose is a well respected leader in the Canadian Energy industry and he has brought some  executives from past successes to apply their skills at Tourmaline Oil Corp ( TOU TSX).

TOU recently completed its initial public offering at $21.00 a share and has already added 14.28% from the issue price closing on January 27 at $24.00. The stock hasn’t been trading long enough to tell us much from the charts so lets look at what Rose and his team intend on doing through 2015.

The six month chart doesn’t have a lot of data to work with but the RSI is telling us the stock is overbought and the MACD is turning down which would indicate a pull back from these levels. Although you would have to agree it has been a nice ride so far.

The company is leveraged to natural gas and is currently producing 22,000 barrels of oil equivalent a day (BOED). Management at TOU intends on ramping that up to 51,837  BOED by 2013 and 76,314 BOED by 2015. In order to accomplish that growth capital budgets will be over $300 million for the next several years.The company has a large undeveloped land position and a drilling inventory of 3,100 locations. The forecast for 2011 is that they will drill up to 90 wells.

There are two periods of seasonal strength for the energy sector according to seasonality expert Brooke Thackray. Late February to early May and then Late July to early October. From a seasonality perspective you have a sweet spot coming up. As far as an entry point for the additional 600 shares you want to buy there are two cases to consider. You could wait for a pull back before committing more money. TOU has run hard out of the gate and hasn’t formed any real support so far. There is however what appears to be a stick and pennant formation on the chart which is a continuation pattern.

As is always the case with investing there is rarely one single conclusion. In this case I would suggest you split the new capital you want to invest. Buy some now to cover the case of a breakout from the stick and pennant and invest the rest when there is more clarity. But these are short term strategies. I think your investment horizon has to be 2015 given what Rose et al want to accomplish.


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