Hi Lou,
Can you give me an opinion on Long Run Exploration? Is it a hold or sell at this time?
Thanks,
Bruce
Hey Bruce,
Thanks for the assignment.
Long Run Exploration Ltd. (LRE) is a Calgary based intermediate oil and gas company which has been sideswiped with the sector. On Feb. 9, 2015, the company announced that the 2015 capital budget would be revised down to $100-million and that the monthly dividend on common shares would be suspended. LRE reported fourth quarter production of 36,500 barrels of oil equivalent per day (boe/d) and estimates that production in 2015 will come in the range of 32,000-33,000 boe/d.
The company has some non-core assets up for sale but unfortunately so does every other player in the patch. I would say that we are approaching a market environment where the bid price for assets is so low that most management teams will be holding on until the price of oil improves or they are forced to sell to meet other obligations.
An inspection of the charts will see if now would be the time to hold or sell.
The three-year chart is what I refer to as a vomit inducing ride to hell. This chart reminds me of the patterns that surfaced during the 2008 financial crisis when there were very few places to hide. At least in this case the damage is currently confined to the energy sector. The lesson to be salvaged from the rubble is that there were multiple opportunities to get out of Dodge and preserve capital.
In late July of 2014 the MACD and the RSI generated sell signals which were followed by a death cross in September and the breach of support at $5.00. In mid-October LRE broke below support at $3.75 and from there it has been pretty much a free-fall.
The six-month chart depicts resistance along the downtrend line and the 50-day moving average. The question at hand is whether to sell or hold. I can only surmise that you are carrying a loss on your position and would be best served taking a tax loss. However, you don't have to make that decision until later in the year and might want to hold on for the possibility of some asset recovery over the next ten months.
At this point there is no evidence to suggest a trend reversal.
Make it a profitable day and happy capitalism!
Have your own question for Lou? Send it in to lou@happycapitalism.com.