McMoRan Exploration Co. (NYSE: MMR) is
engaged in exploring for and producing oil and natural gas in the Gulf of Mexico and the Gulf Coast region. The company owns or controls interests in approximately 400 oil and gas leases in the Gulf, Louisiana and Texas. These cover some 370,000 acres. Altogether, the firm has proved reserves of about 41.2 billion cubic feet of natural gas and 5.8 million barrels of oil and condensate. McMoRan is also pursuing plans for the development of the Main Pass Energy Hub, a proposed offshore liquefied natural gas terminal. Chevron (NYSE: CVX) is a major competitor.
Investors were pleased last week by a Sterne Agee initiation of the stock at "buy" and a favorable update of the company's exploration and development activities in the Gulf of Mexico. Regarding the latter, the firm announced a successful production test at the Flatrock Field No. 2 well and an agreement allowing it to earn working interests in a relatively shallow water well on the Gulf of Mexico shelf.
MMR shares
popped on the news and are now consolidating the gain in a bullish "pennant" pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with three "buys" and two "holds". The MMR Price to Sales ratio (2.28), Price to Cash Flow ratio (5.82), Price to Free Cash Flow ratio (20.57), Sales Growth rate (346.07%), EPS Growth rate (-0.42 to 0.20 yr/yr) and Revenue per Employee ($4.37M) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 71% of the outstanding shares. Over the past 52 weeks, the stock has traded between $10.70 and $21.07. A stop-loss of $17.65 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in either of the stocks mentioned above.
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