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Silhouette of an oil pump jack. (Denny Thurston/Getty Images/iStockphoto)
Silhouette of an oil pump jack. (Denny Thurston/Getty Images/iStockphoto)

Schizas’ Mailbag

Hold on to this Calgary energy producer Add to ...

Hi Lou,

I wondered if you had any thoughts about DeeThree. It used to bounce around from $6 to $7 but now seems to have busted through.

Thanks for any information you might provide.

Tony

Hey Tony,

Thanks for the assignment.

DeeThree Exploration Ltd. is a Calgary-based energy company that has been steadily growing its production. In the fourth quarter of 2012 the company produced 5,333 barrels of oil equivalent per day (boed) and plans on a 2013 exit rate of 8,500 to 9,000 boed. The company will spend $150-million on capital projects which includes a 31 well drilling program. On April 08, 2013, DTX reported the results of production tests on a Belly River oil well that flowed at a rate of 1,920 boed which sparked a rally to a 52-week high of $7.70 on April 11, 2013.

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An examination of the charts will inform my thoughts on this stock.

The three-year chart depicts a stock that has been trading in a range-bound pattern with support at $6.00 and resistance at $7.00. The stock broke below $6.00 but caught a bounce off the 200-day moving average before making the move to its 52-week high where it met resistance at $7.50. DTX pulled back but held support along the 50-day moving average.

The six-month chart provides a clear picture of the bounce off the 200-day moving average when it was trading at $5.79 on April 5, 2013.The aggressive move higher that started on April 8, when the production test was announced, gave rise to four days of robust buying, on better than average volume, that took the stock to its 52-week high of $7.70 on August 11. Since then the shares have pulled back and tested support along the 50-day moving average.

At this point I would say you want to stay on this ride. They have a lot of wells to drill and the management team is quite seasoned. They are moving production to a higher weighting of light oil and natural gas liquids, which is the sweet spot in the energy sector. The company will report first-quarter 2013 results in early May so put that on your calendar.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it to lschizas@globeandmail.com.

 
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