TransGlobe Energy: Buying Back Shares I Sold Last Spring

TransGlobe Energy recently abruptly crashed at the C$3.50 per share mark. The stock tried to stay over the 200-day moving average. However, the bears got too strong.

TGL StockCharts.com July 31

Source: StockCharts.com

This recent decline is a great opportunity for me to rebuild the small position I had last spring. I believe the company is undervalued at this level. On the other hand, I will keep this position small compared to my portfolio because of the obvious risks of operating in Egypt.

Disclosure: I am long TGL.

Pacific Rubiales Energy: A Performance Review

PRE StockCharts.com July 27

Source: StockCharts.com

How did this investment played out? Buying Pacific Rubiales Energy was not always meant to be a short-term, all in investment. Should I say speculation? Yes, I think I should.

Indeed, I was surprised at how quickly the value I called on April 21 was reached. After such a big return in a period this short, and with growing uncertainties concerning the company, and other problems lurking around the corner, it made sense to turn this buy into a short-term speculation.

Disclosure: I have no position in PRE.

Pacific Rubiales Energy Could Run Out Of Cash

  • The cash flow made by the company in the current oil environment won’t be sufficient for the given capex.
  • The weak Colombian peso saves money on operations but this isn’t controlled by the company.
  • The company’s management is mediocre with a quick ratio of under 1 for the last three years.
  • Altman’s Z-score is under or equal to 1.25 for the last three years, which indicates the company is highly likely to fail.
  • The loss of the Rubiales field will surely affect the oil production of the company and therefore its cash flows.

Click here to read the entire article on Seeking Alpha.

Time To Sell Pacific Rubiales

As you may know, I published an article on Seeking Alpha saying that I will sell half of my position in Pacific Rubiales Energy. Now, because of further evidence that the company is much more in trouble than I previously thought, I believe it is time for me to sell the other half of my position in the company.

While the offer made by Alfa and Harbour is fair in my opinion, I believe the offer has really no chance of succeeding. The recent stock movement also indicates that the market believes the offer has no chance of passing the vote.

Therefore, I believe bullish investors should sell their stock now before it is too late. I will publish a detailed article on Seeking Alpha in early July, after my vacations.

Disclosure: I am short PRE.

TransGlobe Energy: It Is Difficult To Get Technical With Stocks

Remember when I called a sort-term pullback in the price of TransGlobe on April 24? It turned out well, but not for the good reasons.

TGL StockCharts.com June 10

Source: StockCharts.com

The stock did break the C$5.40 mark. However, the stock experienced a strong pullback because of the 1Q earnings. Getting technical with stocks can be rewarding. In the end, my reading turned out to be right.

Expect the company to trade in the C$4.80 to C$5.30 range until the fundamentals of the oil market recover. Be patient, it is only a matter of time.

Disclosure: I am long TGL.