Welcome to Oil & Gas Analysis

Investors! You can now compare financial and valuation data on the leading junior and intermediate oil producers in Canada.  Which company has the highest cash flow but lowest valuation?  Play with data for FREE on this new BETA software I’ve created—and give me feedback.

Hi, my name is Michel Massaad, editor of www.BeatingTheIndex.com .  I research and invest full time in the junior and intermediate oil and gas sector.  I do my own research; I don’t read many analyst reports from brokerage firms.

But I read enough to know who the Top 50 junior and intermediate players are on the Toronto Stock Exchange.   And I input the most up to date financial data from them into my custom software so YOU can compare these companies to help you decide which stocks make the best investments for you.

This is just a BETA software—there are a lot of things I want to add for you—but I need some market feedback before going any further.

Keith Schaefer of the Oil and Gas Investments Bulletin is helping me market the product—we are both about empowering retail investors.  We’re offering a FREE, one year subscription to his service for the two investors who give us the most valuable feedback on how to improve The Oil and Gas Stocks Analysis software.

As background, I wanted to compare a stock to its peers based on several valuation metrics like EV/BOED, P/CF and CFPS but it was very time consuming. Market volatility forced me to enter stock prices manually every-time

I wanted to get an updated picture on valuations.

My evolving research skills required a dynamic system that went beyond Excel.

So I came up with a solution to my problem by combining my software background with my passion for investing in the oil and gas sector. I have worked in building software for years and that helped me design a powerful solution that would streamline my research efforts.

First, I really wanted to have the whole oil and gas sector under my fingertips. So I developed a stock screener that allows me to display the whole sector in one list or break it down per category. Stocks are distributed into 5 categories: Junior E&Ps, Intermediate E&Ps, Senior E&Ps, Oilfield Services and Pipelines.

The screener allows me to identify who the top movers were at any time during the day. For example, I can display the top 5 market gainers and losers in the junior E&P category at any time. If I do not wish to look at penny stocks, I can filter the list by price to show stocks above $1 for example. This allows me to spot stocks going higher or lower. It the move is based on a news release, I can quickly assess the news and decide for myself if the stock has more running room left or if the market simply overreacted providing a cheap entry point.

The screener also helps me identify who the best year-to-date performers are. This shows me at all times which stocks the market is rewarding or abandoning in the sector or by category. Last but not least, the screener allows me to pull up all the dividend payers in the sector.

I have the ability to customize my view according to the price range and category of interest. Looking at the sector from the angle of my choice helps me spot momentum, trends or simply get a feel on market sentiment in general.

Now that I had all the stocks in the sector accessible in one spot, I began developing my research modules. Among the 400 plus stocks in the list, there are only a few worth following and investing in. Right now, there are more than 50 stocks covered- that means their balance sheet has been virtualized and is updated on a quarterly basis.

Editing a stock’s balance sheet is very powerful as it provides multiple metrics widely used for valuation purposes. One cannot evaluate a stock based only on 1 piece of data such as EV/BOED. I learned that you need to look at a whole set of data including EV/BOED, P/CF, CFPS, Netbacks and others to read into the market’s thoughts. A stock might be cheap using EV/BOED but very expensive on a CFPS multiple basis or cheap on EV/BOED but has the highest EV/2P reserves.

comparing TriOil Resources to its peers (click to enlarge)

Herein lies the power of Oil and Gas Analysis software, you get to read what the market is thinking by displaying the full set of valuation data. Most importantly, you can compare this data to peers with equivalent production mix.

Comparing a stock to its peers allows you to visualize where its valuation stands relative to the peer average. It also helps you project the upside in capital gains if you believe the market will reprice your stock according to the average combination of metrics.

This brings us back to the balance sheet edition. This tool allows you set your own commodity prices according to your expectations. Early in 2012, when it was clear the winter heating season was lost; analysts were still using $3.75/mcf in their natural gas price estimates for the year. Yet, natural gas prices were hitting lower lows one day after another and ended up averaging about $2.15./mcf for the year.

This feature allows you to take commodity price projections into your own hands. Where you think oil or gas prices will be in the coming months can quickly translate into target price projections based on a company’s cash flow.

This powerful feature also allows you to confirm the sustainability of a company’s distribution. Dividend paying companies have to generate enough cash flow to support maintaining production levels and paying out the distribution. When cash flow keeps dropping as a result of lower realized commodity pricing something has to give, either the capital spending is cut or the distribution is slashed. In both cases, the market starts to price the risk of a cut in earnest.

A clearly unsustainable dividend, but what if the capex is cut?

Retail investors are usually the last to realize why a dividend paying stock took a beating. However, that should no longer be the case because now you can run multiple scenarios to stress-test a company’s distribution. You will finally be able to see who is borrowing to pay his dividend and who is not. That allows you to choose a dividend paying company carrying a debt level you are comfortable with.

If you’re a novice investor, this is your chance to learn all about investing in the oil and gas sector. The help section is built with you in mind and the team is accessible at all times by email to answer your questions.

If you’re an experienced investor, I think this will complement your strategy by increasing your efficiency in spotting opportunities and evaluating companies based on multiple data points.

The Oil and Gas Analysis site is the only tool you need to make faster and smarter investment decisions for better profits in oil and gas stocks. Sign up here and see for yourself how easy and powerful this software is. We would really appreciate your feedback. Tell us what you think or how it’s helping you make or save money and get a free 2 months subscription in return upon official launch.