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PetroBakken has set a capital expenses budget of $700-million for the next year, most of which will be used to drill, complete and equip more than 183 wells in the Bakken and Cardium light-oil plays. (Gordon Pitts/The Globe and Mail/Gordon Pitts/The Globe and Mail)
PetroBakken has set a capital expenses budget of $700-million for the next year, most of which will be used to drill, complete and equip more than 183 wells in the Bakken and Cardium light-oil plays. (Gordon Pitts/The Globe and Mail/Gordon Pitts/The Globe and Mail)

Schizas' Mailbag

Petrobakken Energy is a buy Add to ...

Hello Lou,

I came across your about report published by globeinvestor.com on March 18, 2011.

I have recently been looking at the technical charts for PBN. I am interested in making an investment.

Could you please provide your latest opinion?

Many thanks,

Chandra



Hey Chandra,

This will be the sixth time that I have posted on the prospects for Petrobakken Energy Ltd. since Oct. 15, 2010. Up until my last post of July 25, 2011, I had been very cautious on the stock given that it had been in an established downtrend for close to two years.

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In July there were a number of indicators that suggested that the shares could catch a lift off of $14.45. Unfortunately, resistance along the 50-day moving average was formidable and the decline continued. A rock bottom was hit on September 30 at $6.05 and once we got into October of 2011 the shares started to move up, driven by talk of takeovers of mid-tier producers.

An examination of the charts for PBN will provide more evidence to help you with your decision.

The three-year chart illustrates the resistance along the 50-day moving average back in July. Currently the RSI has been in overbought territory for some time which is a sign of strength.

The MACD on the six-month chart illustrates the buy signal that formed in October and the golden cross that is about to surface. At this point there isn’t much resistance until $20.00.

With a dividend yield of 5.9 per cent and management having recently addressed some balance sheet issues, it appears that PBN has more gas in the tank. Longer term, the company has a large land base and an extensive inventory of development drilling targets that should help drive increased output without the risks associated with exploration.

With the bottom in, the resolution of the debt issues that were casting a pall on the shares, the emergence of a new uptrend and takeovers in the sector, PBN is a buy.

Make it a profitable day and happy capitalism!

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

Visit his website

 
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