Junior Oil Stock Reports Massive Increase in Revenue and Earnings

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The volatility in oil prices continues to be quite extreme. These volatile moves then tend to influence oil stocks, which obtain revenue from oil prices. Obviously, for the long-term investor in oil stocks, oil prices are one component, as is the quantity of reserves a firm has and the potential for developing further resources. One method for long-term investors is to look at relatively smaller and younger oil stocks that can grow over time.

Triangle Petroleum Corporation (NYSE/TPLM) is one of the more interesting oil stocks. It has both exploration and production operations within the Bakken Shale and Three Forks area of North Dakota and Montana. The company has over 86,000 net acres of land available, targeting shale formations in the Williston Basin. (Source: Triangle Petroleum Corporation, last accessed January 7, 2013.)

For the third quarter of 2013, which ended October 31, 2012, Triangle Petroleum reported sale of oil and natural gas of $10.4 million, up from only $3.4 million in the same quarter during the previous year. The firm also reported revenue of $12.5 million from pressure-pumping services, up from no revenue the same quarter in 2011. Total revenue was $23.1 million during the latest quarter, up from $3.4 million during the same quarter last year. Net income attributable to shareholders was a profit of $992,866, up from a loss of $2.1 million during the same quarter last year. (Source: “Triangle Petroleum Provides Operational Update, Financial Results of Third Quarter Fiscal 2013,” Triangle Petroleum Corporation, December 10, 2012, last accessed January 7, 2012.)

With the recent move upward in oil prices, this should benefit oil stocks, such as Triangle Petroleum. While one concern is certainly the potential for oil stocks to oversupply the domestic market, high international oil prices and the development of pipelines for transporting this commodity to much-needed areas should help keep oil prices strong.

While oil prices do play a significant role in the value of oil stocks, how Triangle Petroleum is able to manage its exploration and production is extremely crucial to its success. Obviously, since entering the North Dakota basin in 2010, the firm is on a growth path that is quite fast.

Chart courtesy of www.StockCharts.com

Junior oil stocks can be quite volatile. After having a massive rally during the summer, the decline in oil prices during the fall weighed heavily on the stock. The stock recently moved above both its 50- and 200-day moving averages (MAs). The stock is now sitting at a resistance level—its 50% retracement from the recent move from October to mid-November.

With oil stocks that are quite new and inexperienced, it takes more than just oil prices to drive the share price higher. Seasoned investors want to see that the management teams of these oil stocks are able to efficiently execute their development plan and continue production without any major problems.

While oil prices are beyond the control of management of these oil stocks, there are many variables they can control, namely costs. I would like to see several quarters of sustained growth and strong execution for this company. Also, we have a lot of geopolitical risks that may influence oil prices later this year.

Both of these issues are crucial to a sustained move in the share price for Triangle Petroleum and many other oil stocks.

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