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In what can be a cyclical industry, experts say Consol Energy Inc., Equitable Resources, Atlas Energy and Superior Well Services got it right, preparing for booming commodity prices, but not letting the good times get away from them.
"A rising tide lifts all boats, but Equitable has done a good job in executing its business plan," said Paul Franzen, an energy analyst who follows the company for Edward Jones & Co., in St. Louis.
Stock prices are a good barometer of how investors see a company. For the quartet of companies listed above, each has seen its stock price within the last 30 months jump at least 112 percent between the shares' low and high closing number.
The leader in terms of percentage increase in stock price over that time frame is Consol, which went from a low price of $29.06 on Sept. 20, 2006, to a June 18 closing of $117.34 -- a 303.8 percent leap.
Consol's (CNX) stock closed Friday at $100.30, up $4.48. Equitable's (EQT) shares closed the week at $64, up 14 cents. In the last year, it has traded as low as $44.57 and as high as $76.14. Atlas (ATN) shares closed Friday at $39.74, up 2 cents. Its 52-week trading range is $23.65 to $45.40. And Superior Well's stock (SWSI) closed at $31.78, up $2.33. Superior's 52-week low was $16.88 and its high was $34.69.
"Consol is in a very advantageous position; it has large reserves of high BTU (British Thermal Unit) coal, and it has good management," said Pearce Hammond, an energy analyst in Houston who follows Consol for Simmons & Co. International.
The four companies, which differ in a number of ways, such as time in business, market capitalization and geographic footprint, all have at least one thing in common -- natural gas.
Equitable is known in Western Pennsylvania for its natural gas distribution system, although Chairman Murry Gerber rapidly is moving the company to become a energy production company. Moon-based Atlas is an independent primarily natural gas exploration and production company, while Superior, of Indiana, Pa., is a well-known oil and natural gas field services company.
"We've been successful in transforming the company, which had been focused on efficiency and stability, to become a growth company," said David Porges, Equitable's chief operating officer and Gerber's first hire when he joined the company 10 years ago.
To make the change, Gerber, Porges and other top executives have been willing to invest the money needed to transform Equitable, Porges said. In fact, unlike many companies, Equitable invests far more than it earns to an energy exploration/production success.
Consol's involvement with natural gas occurred while the coal company was trying to safely dispose of the gas known as coalbed methane found with the coal it was mining.
"In the early 1990s, we developed the technology and techniques to extract coalbed methane from coal seams prior to mining," said spokesman Tom Hoffman. "We thought at the time that if gas went to $3 per thousand cubic feet, we might make a little money. Now, with gas at $12 per thousand cubic feet, we're makin' a lot of money."
Consol sold about 18 percent of what today is known as CNX Gas Corp. to the public three years ago, and continues to reap the benefits of its holdings. But the 148-year-old company continues to rely primarily on coal mining, with some 2 1/2 billion tons of reserves, primarily east of the Mississippi River.
Analyst Hammond said Consol has benefitted immensely because it's well positioned, having tremendous coal reserves, and the ability to export product from its own terminal.
"Certainly, the energy situation has helped all energy companies, but for coal, the fundamentals have flipped," Hammond said. "What's driving the market is the international demand for steam coal. Europe used to look to South Africa for its steam coal needs, but South Africa has had production issues, and the Indians are buying up South Africa's coal."
Thus, Europe is looking west for its coal needs, Hammond said, with Consol's coal-exporting terminal in Baltimore ready to move its product and that of other exporters.
"The rising prices for coal internationally are tending to bring up the domestic prices," said Hoffman. "We've benefitted from the linkage of the global and domestic markets."
Superior Well Services is staffed with a number of ex-Haliburton employees, who seized an opportunity to do what they were doing for Haliburton for themselves, said analyst Joseph Agular.
"Superior is a growth story over the last few years, adding what's called service centers in new geographic markets," said Agular, who follows Superior Well for Johnson Rice & Co. in New Orleans.
Key to Superior Well is its pressure pumping service, pumping liquids into drill holes to fracture rocks and allowing natural gas to more freely flow.
"There's been a shift in the U.S. to drilling in the shale basins, like the Marcellus," Agular said. "Superior is well positioned in 2008 and 2009 and beyond for the shale plays. Demand for pressure pumping will continue to increase."
Atlas' key to a rising stock price includes its limited liability corporation structure, and that it sponsors and manages investment partnerships help minimize tax expenses, said Michael Hall, an energy analyst in Denver with Stifel Nicolaus.
"Atlas also has done well integrating its upstream, or exploration and production activities, with its midstream, or gathering and pipeline operations, business," Hall said.
But Atlas stands out because of its 242,000-acre holdings in what's becoming the hottest natural gas exploration area in the country, the Marcellus Shale formation, Hall said. Much Marcellus activity is taking place or planned for Western Pennsylvania.
"Atlas is one of the most attractive ways to play the Marcellus Shale," Hall said. "That stands them out ahead of the pack."
To see more of The Pittsburgh Tribune-Review or to subscribe to the newspaper, go to http://www.pittsburghlive.com/x/pittsburghtrib/. Copyright (c) 2008, The Pittsburgh Tribune-Review Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
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