Swift Energy (SFY) Pops: Dead Cat Bounce or Insider Purchase?

Michael Teague  |

Houston, Texas-based Swift Energy Co. (SFY) is a $562 million independent oil and gas company that operates primarily in Texas in the Eagle Ford Shale-formation, as well as parts of Louisiana.

Subsequent to the release of its third-quarter earnings report during the previous week, on Oct 31, Swift saw shares trading over 4 percent higher, the result of enormous year-over-year improvements. For the recently-ended Q3, Swift’s earnings of $8.9 million, or a diluted $0.20 per share on revenue of $153 million were a huge increase on Q3 2012, when the company netted $3.1 million, or $0.07 per diluted share on revenue of $128.8 million. Sequentially speaking, the numbers were a significant improvement as well, beating the prior-quarter’s $6.7 million, or $0.15 per diluted share.

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A closer look at the numbers indicates that the company benefited from higher prices for oil and natural gas liquids throughout the period, but increased production and efficiency were cited by CEO Terry Swift as well: “During the third quarter, we have continued to improve our operational efficiencies in South Texas. Despite a slower drilling and completion pace than earlier in the year, we grew production during the quarter primarily as a result of greater productivity per well. Our emphasis on drilling horizontal wells in a narrow, high quality interval of the lower Eagle Ford has resulted in more exposure to the highest quality rock available on our leases.”

Despite the initial excitement, however, investors retreated the very next day, erasing all of the company’s earnings-pop and then some, with a 5.5 percent drop heading into the weekend.

On Monday, the “dead cat bounce” label was being slapped on the stock after shares blasted up 14 percent shortly after the week’s trading began. Technical analysts describe see a dead cat bounce in a stock’s pricing pattern when it jumps in such a way as to suggest the end of a down-trend, but then quickly erases those gains to end up even lower than it was prior to the bounce.

The dead cat bounce pattern is typically an opportunity for investors and traders to open up short positions. Swift energy currently has a short float of just over 23 percent, and is incredibly sensitive to larger market currents, with a Beta of 2.39, but today’s spike finds its overt cause in an insider purchase of some 10,000 shares at $14.11 each.

Shortly ahead of the closing bell, SFY was trading for $14.85 per share, but the stock has been in decline for at least 2 years, having lost over 56 percent of its price during that period.

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