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Insiders Think Basic Energy is Priced to Buy

NEW YORK ( TheStreet) -- Let's face it; these are not the best of times for companies that produce natural gas as well as oil. When natural gas prices dropped below $2 per thousand cubic feet (MCF), investors almost panicked.

We've heard stories that the industry is producing more natural gas then there are facilities in which to store it. Some claim that the disparity between demand and production is on the level of 3 billion cubic feet per day. Can demand suddenly take up that kind of slack?

Then there are the issues about the nation's second-largest producer of natural gas, Chesapeake Energy (CHK - Get Report). They've been making mostly negative headline financial news almost daily, and this has done further damage to the natural gas story.

It's Often Darkest Right before the Dawn

The plunging price of natural gas can also spell opportunity. We're seeing many strong energy companies like Apache (APA - Get Report) and Devon Energy (DVN - Get Report) fall to compelling levels.

As Alexander Green, the Investment Director for The Oxford Club recently commented: "Historic buying opportunities are now developing in this bombed out sector. Or, as renowned investor Jeremy Grantham recently put it, 'Everyone who has a brain should be thinking of how to make money on this.' "

When corporate officers and directors of companies in the "energy patch" wake up and see that now's the time to buy more shares of their company, many of us take special notice.

These "insiders" often have a good read on when their company's share price is unreasonably low. They can see the company's daily balance sheet and the pipeline of work orders coming in and how that's likely to boost the company's earnings over time.

A recent example of this involves a company that provides various well site services to oil and natural gas drilling and producing companies in the United States. It trades for less than 7 times current earnings and almost 6 times forward earnings.

Basic Energy Services (BAS - Get Report) claims proudly that they have "over 600,000 active wells in our footprint". They're also confident because they're "focused on the most prolific oil and gas producing regions in the country."
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APA $52.13 -3.89%
BAS $2.99 -0.33%
CHK $5.80 -11.99%
DVN $32.75 -5.24%
AAPL $95.18 1.64%


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