This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Extreme weather has changed our investing priorities

Stocks in this article: AMZG CBI KOG OAS SLCA WLL

By Tyler Kocon

Minnesotans are no stranger to the harshness and intensity of a deep winter freeze. During parts of the year, when the sun is only visible for 10 hours a day, sub­zero temperatures can seem insurmountable. Pipes freeze over like lake surfaces. Vehicles labor through daily operation.

The entire world just seems to slow down and struggle through an ice­-glazed period in time. Despite the warm comforts of shelter, there is one fact that always remains; it is really, really cold outside. Businesses are not immune to this fact, and companies that are unable to shelter their operations are hit even harder.

Minnesotans have it rough, but North Dakota is one of the most frigid places in all of America during the depths of winter. It just so happens that North Dakota is also the predominant home of the Bakken shale, where weather conditions have been much less than desirable over the past couple months.

Several companies have alluded to the weaknesses of oil and natural gas exploration and production activity in the Williston basin. American Eagle Energy (AMZG) released a report in early January detailing the impact that weather conditions have had on their operations.

Similarly, U.S. Silica (SLCA) cautioned investors in their fourth quarter earnings guidance that weather interruptions impacted their operations and demand for product. It seems that the cat is out of the bag in regards to weather impacting hydrocarbon operations in the Bakken, and the worst is likely still yet to come in our view.

Based on our personal experiences, the weather patterns have prompted a change in our investment priorities. We are placing less of a focus on companies engaging in exploration and production–and more of a focus on companies that feel less of an impact from the extreme weather.

In particular, our holdings in companies with a very specific geographical area of focus in North Dakota operations were pared down. Companies like Kodiak Oil & Gas (KOG), Oasis Petroleum (OAS), and Whiting Petroleum (WLL) focus a majority of their operations in North Dakota, and thus are prime candidates to experience weakness during upcoming earnings reports.

On the flip side, portfolio managers are tracking the nationwide oil and natural gas infrastructure build-out. One particular company that provides solid upside potential is Chicago Bridge & Iron Works (CBI). In our opinion, CBI is a prime candidate because of the company's unique focus in energy infrastructure. The company provides engineering and construction services to the oil and gas industry as well as proprietary consulting and technical services.

CBI participates in projects ranging from pipeline construction to storage tank fabrication and refiner facility maintenance. As of December 2013, the company had laid over 2 million linear feet of piping. The low cost natural gas environment and sustained demand for liquefied natural gas (LNG) has generated a necessity for CBI's services.

As a market leader in energy infrastructure, CBI is heavily involved in the domestic infrastructure buildout process. While only 20% of 2012 revenue was earned in the U.S., 65% of the company's backlog was attributable to U.S. operations. If management holds true to their objectives, CBI may be able to capitalize on North American LNG and Petrochemical opportunities in the future.

With a list of oil and natural gas pipelines growing at a regular pace, the concept of declining demand behind CBI's business seems farfetched. As the story of expanding, improving, and establishing a large scale pipeline infrastructure system continues to unfold, CBI should find themselves in the thick of it all as the build out continues to progress.

DISCLAIMER: The investments discussed are held in client accounts as of January 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.

Tyler Kocon

Tyler Kocon

Split Rock Private Trading & Wealth Management is a registered investment adviser based in Minneapolis. Split Rock provides access to …

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs