Our special focus this week is on Oil & Gas Exploration & Production. One of the analysts, Phillip Dodge of Stanford Group Company said in our panel discussion of this space that, despite the turbulence and downturn in this space in the last year, we have seen the bottom:

Mr. Dodge: I think we have seen bottom. Many companies have cut back significantly in their budgets for 2009 with the approach that they can stay within their cash flow if prices remain low, but they can keep the flexibility to raise spending later in 2009 if prices recover.

TWST: So it’s like trying to straddle a fence.

Mr. Dodge: Yes, I think it’s probably a good approach. They don’t want to try to forecast prices so they will live within their means unless prices recover.

For the complete Oil & Gas Exploration & Production report, including interviews with analysts covering many parts of this space, stock picks, and a full roundtable discussion, click here.  

This week our Off the Record picks come from our special focus on Gold & Precious Metals. We spoke with analysts and CEOs in this space who gave us their anonymous picks in this space:

1. Goldcorp (GG) - “They’ve got a very good track record of building out projects, drilling them out and growing them geologically. We think they’ve done a very good job in that regard.”
2. Kinross Gold (KGC)- “As a major we like Kinross Gold. They have a great growth profile in terms of major new projects coming on stream this year and over the next two or three years. And they’re very well capitalized and we just like their growth profile and their cost structure.”
3. Yamana Gold (AUY)- “I would say it’s Yamana Gold. Their consolidation plan has been absolutely extraordinary and they’re positioned well in the market today.”

For the complete Gold & Precious Metals report, including a complete examination of this space, and where it’s headed in 2009 in addition to more stock picks, click here.

Looking more closely at the Alternative Energy space this week, we spoke with Colin Rusch- a Solar Energy analyst at Broadpoint Securities Group. Rush was quite sunny about the business in Solar Energy, despite the dark times in other areas:

Mr. Rusch: From my channel checks, there is still a robust business happening for the solar industry…I think the solar industry is still in a positive stance looking at robust fundamentals in the near term and then really trying to sort out where mid-term fundamentals go. Longer term I think most everyone’s in agreement that there’s going to be a robust industry at far lower prices. It’s important to note that much of the industry is already financed to do that sort of R&D and commercialization on cost saving measures.

For the complete Alternative Energy report, including a complete interview with Mr. Rusch, as well as an overview of different areas within the Alternative Energy space, click here.

When Congress passed the $700 billion bailout, after much hullabaloo, the question remains when the effects of the bailout would be seen, and if, indeed, the bailout was a successful strategy. In our special focus on Alternative Energy here at TWST, we asked some of the analysts we talked to whether or not they got the response they expected from the bailout package, which included extended subsidies in the alternative energy space:

Mr. Pang: We haven’t really gotten the lift in the group that we had expected. The sector has pretty much rebounded with the market so it hasn’t really had any additional impact. I think there are a couple of reasons for this. One, it’s still to be determined how the ITC will actually help individual companies. Two, and more important, the overall economic conditions are still a concern. If you look at what’s happened with the group, not much has changed in terms of their guidance, but these stocks were off 50%, roughly, through the summer period.

For the full Alternative Energy report, including interviews with analysts from a variety of perspectives on the market and stock picks, click here.  

Our top picks this week come from our second special focus on Steel Producers. Mark Parr, analyst with KeyBanc Capital Markets told a little about where he’s directing investors to look in the Steel Producers space:

TWST: What names should investors look at?

Mr. Parr: Near term, given the divergence between selling prices and scrap costs, we would focus a little more aggressively on the electric arc furnace steel producers like Steel Dynamics (STLD) and Nucor (NUE). I think GrafTech (GTI) is another great small cap name. They are a material supplier in the steel industry, but it’s a great fundamental story and the stock has really gotten caught up in this commodity downturn. Cleveland-Cliffs (CLF) is another story that I think has really gotten caught up in the commodity downturn and has got a very bright future with some tremendous fundamental value that’s not being realized in the market. Those are the four names I’d probably focus on right now.

For the full interview with Mr. Parr, including a complete overview of the Steel Production sector and an outlook for where its headed, click here. 

Our Off-the-Record this week focuses on management teams that are contributing most to shareholder value in the Oil and Gas Services and Equip sector. Here’s the picks the people we interviewed had:

Dawson Geophysical Co. (DWSN)- “I think the guys at Dawson Geophysical are great, and you’ve got Decker Dawson there, who has now been in the seismic business I think he told me 61 years, so he’s got a bit of experience on his side. In these types of environments I like any management that runs a business for the long-term; there are a lot of smaller companies out there where managements are running on a day-to-day basis or to put it another way, are trying to respond to what the market wants today. That’s not what I want to see in this environment.”

National Oilwell Varco (NOV)- “I would mention National Oilwell Varco. Pete Miller, Clay Williams and their team have done a remarkable job after the combination of National and Varco. A merger of that size coming off as smoothly as it has is a real achievement.”

Schlumberger Ltd. (SLB)- “Schlumberger you go to bed sleeping well at night knowing that they are going to be allocating their capital the proper way, knowing that they are going about their business the right way. While it may not always be the best performing stock, you have faith in that management because they are very smart.”

For the complete Off-the-Record report, including general comments on the industry as a whole, and more stock picks, click here.

Arena Resources Inc. (ARD) reported their earnings last week, and they had a great second quarter. For the three month period ending in June 2008, their oil & gas revenues were up 188% from the same time last year, and 181% from the sixth month. In addition, the company has seen a significant increase in a net cash flow and the development over 50 new oil wells.

To find out more about how Arena Resources achieved these results during this turbulent economic time, read this week’s interview with  current CEO Phillip Terry. 

This week our off the record comes from analysts and CEOs dealing with oil and gas drilling and exploration. Here’s what the people we interviewed picked this week:

The most popular name this week is the company Chesapeake Energy Corp (CHK). 3 Analysts and a CEO had this company as their top pick:

“[Chesapeake is] a phenomenal story — a company that was on the verge of bankruptcy in the late 1990s today is one of the largest energy companies in the US, certainly the largest natural gas company.”

“I think that among North American focused companies, Chesapeake, led by Aubrey McClendon, has just really led the industry in not only accumulating acreage that is turning out to be extremely prospective, Haynesville being a great example of that, but also is just emerging as a dominant force for growing the domestic gas supply.”

“Chesapeake I would certainly have toward the top of my list. I think Chesapeake has probably been the most visionary of the managements in this group.”

“Aubrey McClendon in his own way (although very controversial and not always that consistent I don’t believe, in terms of some of what he indicates and then what he actually does — which is a negative) has been very farsighted and proven that over the years in terms of not only the gas theme but also in terms of the resource play concept.”"

For the complete Off the Record report, including a compelling variety of stock picks disclosed anonymously by industry professionals, click here.

In our investment strategies report this week, we spoke to portfolio manager Neil Berlant of the PFW Water Fund. As the name suggests, Mr. Berlant fund is unique in that it is exclusively interested in investing in the water industry.

According to Mr. Berlant, this is a “genuinely an explosive and extraordinarily attractive industry.” Mr. Berlant predicts the price of water is going to go up to two or three times what it costs now over the next few years. This is a result of the demand cure for more plentiful and cleaner water becoming steeper and steeper. Mr. Berlant sees little chance of companies in this space declining any time soon, given the necessity of this utility, and the fact that it has so long been taken for granted.

For the full interview with Mr. Berlant, including a complete overview of what he looks for in water companies, and wide variety of stock picks in this space, click here.

This week, we spoke to a few analysts about the state of Coal, which is doing quite well in this economy.

Analyst David Khani gave us his pick in the coal area: CONSOL Energy (CNX):

TWST: What puts CONSOL Energy at the top of the heap?

Mr. Khani: It has great coal reserves within the Northern Appalachia region and owns most of its coal in-fee (no royalties). They are a very low cost producer, and they are at the edge of a 30%-40% production growth phase. The last part of it is that they own 80% of a great natural gas business. That business is also a very high margin business with 15% plus annual production growth. They are unearthing new play types and have a tremendous amount of undeveloped acreage that should give them very visible growth probably for the next 10 to 15 years.

For the full interview with Mr. Khani, including a complete overview of the coal space and more stock picks, click here.

For the TWST interview with Thomas Hoffman, former CEO of CONSOL, click here.