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Topic: Energy Stocks

Energy stocks: Poseidon aims to grow with the shale gas boom

Energy stocks: Poseidon Concepts image

Pat McKeough responds to many personal questions on specific stocks and other investing topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions.

This week, one Inner Circle member asked about one of Canada’s fast-growing energy stocks. Pat assesses the prospects of a company that has seen its revenues climb as it supplies clients in the shale gas industry.

Q: Pat: What is your recommendation on Poseidon Concepts? Thank you.

A: Poseidon Concepts (symbol PSN on Toronto; www.poseidonconcepts.com) rents its fluid-handling tanks to over 100 customers in the oil and gas industry.

In November 2011, Open Range Energy changed its name to Poseidon Concepts after it handed out shares of its oil and gas production interests to its shareholders in November 2011. This new company retained the Open Range Energy name and Toronto symbol ONR.

Poseidon kept the tank rental business and began trading on Toronto under the symbol PSN.

Shale oil and gas producers rent Poseidon’s tanks to hold fracturing fluid, which they use to break apart the rock and release the oil and gas.

Poseidon designed the tanks, but other companies make them. The company now rents about 240 of its tank systems across North America. It believes that its large tanks are more efficient than competing models because they can hold much more fracturing fluid (up to 41,000 barrels), are easier to transport and heat the fluid less expensively.

Poseidon’s tanks are also a safer alternative to the lined pits that oil and gas producers often use to store fracturing fluids for large jobs; these pits are now coming under increasing regulatory and environmental scrutiny.

As a member of my Inner Circle, you will get individual answers to your personal investment questions. And you will see my answers to questions other investors like you are asking. In fact, you will get virtually all the investment advice I have to give. You will have access to all of our advisories – The Successful Investor, Wall Street Stock Forecaster, Stock Pickers Digest and Canadian Wealth Advisor – and full access to the members-only, password-protected Inner Circle section of The Successful Investor Network website.

Although my team carefully researches all the stocks that members ask about, I personally review each and every recommendation. To ensure this close personal attention, only a limited number of members can be admitted to our Inner Circle. Under the pressure of world events, even more investors are asking for my personal investment advice. We are nearing our membership limit already. Click here to secure your membership in the Inner Circle right away.

Energy stocks: Poseidon plans to expand tank fleet

In the three months ended September 30, 2011, Poseidon (then the combined Poseidon and Open Range) reported revenue of $31.8 million, up sharply from $9.4 million from a year earlier.

Oil and gas producers supplied $11.3 million of the company’s revenue in the latest quarter, up from $9.8 million a year earlier. The jump is the result of the company’s expansion of its tank fleet from just 25 units at the start of 2011. Earnings rose to $0.22 a share from $0.02 a share. Poseidon’s total debt on September 30 was a low $59.9 million.

The company aims to grow its tank fleet to 400 by mid-2012. This will raise its total fleet-wide storage capacity to 11 million barrels from six million barrels on December 31, 2011.

Poseidon has just issued 6.3 million new shares at $13 each to raise $82.5 million. It will use the proceeds to pay down debt and build more tanks.

The company is forecast to report earnings of $1.22 a share in 2012. The stock trades at 12.7 times that estimate. Poseidon pays a monthly dividend of $0.09 a share, for a high 7.0% yield.

In the latest Inner Circle Q&A, Pat looks at whether Poseidon can continue to be successful in managing its rapid growth and whether it can sustain its high dividend yield. He then sums up with his clear buy-hold-sell advice.

Inner Circle members see Pat’s analysis and recommendations on the stocks that other members have asked about in each week’s Inner Circle Q&A. You can view it immediately when you become a member of this unique investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle website, and many other membership privileges. Click here to get started right away.

(Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.)

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