Special Situation Ideas for week of 16-Dec-2013

Those looking into some catalyst might want to ponder over these names for the week, that I have come across in my reading.

Whiting Petroleum (WLL): For many years, Whiting Petroleum (WLL) was just another bit player in the domestic oil exploration industry. WLL tended to buy cheaper acreage in marginal drilling formations. As a player of long shots, Whiting's shares historically have traded at a discount. WLL likes to go out to areas people aren't focused on, paying less. As a result, many were long skeptical of WLL's prospects, however it's beginning to look like its efforts are paying off. In North Dakota's Bakken and Colorado's Niobrara, WLL is now seeing success with properties that were once thought to be "fringy." In the Bakken, by experimenting with new well-completion techniques, WLL has been able to squeeze 50% to 75% more in initial production out of new wells, said the CEO in 3Q call. In Colorado, initial results on a small number of wells have been really good. 

Record production led to record cash flow of $450.1 million, up 31% from the year before. WLL is a major player in two of the hottest Lower 48 U.S. oil plays in the last 40 years: the North Dakota Bakken and now the Colorado Niobrara play. In North Dakota, a state that has been very friendly to drilling interests, Whiting has amassed huge acreage. While Continental Resources (CLR) still leads in the Bakken, WLL is coming on strong. With initial production on new wells up 50% or more, WLL can produce astounding results. Meanwhile, WLL's early success in Colorado's Niobrara is also attracting attention. WLL trails Colorado drilling leaders like Anadarko (APC) and Noble Energy (NBL) but  the success they've had in the Niobrara is better than people expected a couple of years ago. But even with promising drilling results in Colorado, rock-smashing Whiting will have to keep an eye on political opposition. North Dakota is safe but Colorado is not. WLL , according to industry estimates might have  amassed 500,000 acres in unidentified areas, with some believe 200K of the 500K is in Michigan.However like other oil producers, WLL is hostage to global oil prices. The prospect of a negotiated settlement to the Iranian nuclear crisis has already put some downward pressure on prices. The success of fracking in North America has created enough new supply to depress natural gas prices. In time, the success of Whiting and other rock-crackers could weigh on oil prices too. But Whiting can still earn a solid return with oil prices in the low 80s.

Comverse (CNSI): CNSI provides telecom businesses with billing, customer-service, and data-management systems with a stock market value of USD 809m. Becker Drapkin Management acquired a 6.1% position in the firm. Becker acquired shares at an average cost of USD 31.92 per share. CNSI has USD 333m cash (including restricted and escrowed funds) with no debt and USD 69m of Ebitda. CNSI is a company with two strong segments - telecom billing and value-added services, but is in the early innings of a turnaround. In FY12, it hired Philippe Tartavull and Thomas Sabol, respectively the former CEO and former CFO of Hypercom, who executed a successful turnaround resulting in the sale of Hypercom to Verifone in FY11. The new management has already reduced costs at Comverse and rebuilt the sales team. Moreover, Comverse has the balance sheet to fuel a successful turnaround. While undergoing an operational turnaround, the company can easily buy back a meaningful portion of its float and emerge a leaner and more profitable company. Becker will definitely meet with management and could even get involved from a board level to advise on the turnaround and capital allocation.

Gentherm (THRM): New Technology adaptation, initiation of dividend (as all preferreds are paid off by Sep-13). Also credit facility, needs to be looked into. 21x P/E; 23% ROE. Developer and marketer of thermal management technologies for a range of heating and cooling and temperature control applications. Automotive products include actively heated and cooled seat systems and cup holders, heated and ventilated seat systems, thermal storage bins, heated seat and steering wheel systems, cable systems and other electronic devices. The Company is developing materials for thermoelectrics and systems for waste heat recovery and electrical power generation for the automotive market that may have applications for consumer products, as well as industrial and technology markets.

ImmunoGen (IMGN): Develops targeted anti cancer therapeutics using similar technology to SGEN it calls "Targeted anibody payload (TAP)". IMGN licenses its technology to Biogen Idec, Sanofi, Amgen, Novartis and Roche. TAP is a simple MaB that carries its lethal payload of anti-cancer drugs to its target site and the drugs are more effective and cause fewer side effects. Might become a takeover target