Eric Roseman, editor of Commodity Trend Alert, says McMoRan Exploration is a play on higher oil and gas prices, which he thinks will happen in the next year.

McMoRan Exploration (NYSE: MMR), through its subsidiary, McMoRan Oil & Gas LLC, engages in the exploration, development, and production of oil and natural gas offshore in the Gulf of Mexico and onshore in the Gulf Coast area. It also engages in the incorporation of 3-D seismic interpretation, offshore drilling to total depths, and horizontal drilling.

McMoRan, founded in 1994 and headquartered in New Orleans, owns or controls interests in 380 oil and gas leases in the Gulf of Mexico and onshore Louisiana and Texas covering 1.22 million gross acres. It has proven oil and gas reserves of approximately 344.8 billion cubic feet equivalent, of which 70% represents natural gas reserves.

MMR currently has $225 million in cash with no borrowing under its revolving credit facility. The company’s stock market cap is [over $500] million. This stock is a recovery play on natural gas, which gained more than 10% [recently] and remains the most depressed commodity in 2009.

Over the last three years, MMR has been recommended because of a one-two punch combination of strong corporate insider buying and a low stock price. The company is also well-managed and has a good balance sheet.

However, low gas prices has hurt the bottom line this year, with earnings suffering through June 30th; I don’t expect that trend to continue, and judging by insider trading activity, neither do the companies’ two co-chairmen.

Recently on June 17th, MMR’s two co-chairmen purchased a combined $5.5 million worth of company stock at $5.75 per share. What’s eye-popping about this insider purchase is that insider buying is occurring at a time when executives in the US [have been] dumping stocks en masse since April.

MMR’s stock price, like the rest of the energy sector, has been mauled since last July. From its all-time high in 2008, MMR trades 80% below its best level and is now supported by strong insider purchases since June.

Energy prices–especially depressed natural gas—will eventually recover. I know the supply story for gas is bearish at the moment, and El Nino isn’t helping demand; but I’m committed to buying and holding natural gas because at this bombed-out price we’ll probably double our money over the next 12 months.

I’m a big energy bull longer term and combined with sizable insider buying, this investment has the potential to reap another 50%-75% or more—just like it did for us over the last 36 months.

The stock has crashed, values are enormous, and we’ve got insider buying. In my book, that’s win, place, and show. [So,] buy MMR at market up to $6.75; be sure to place a 20% stop-loss on your entry price. (It closed slightly above $6 Friday—Editor.)

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