With current oil price, asset base and revenue, current fair value is over $5. Higher oil, asset sales and debt repurchase are all what get us back above it.
1. Charts, trendline from 2/25 low to 4/25 high shows $3.45-3.55 next stop.
2. Oil is at 7 month high, CRC's 7 month high was $5.15
3. 7 Month high of $5.15 - today's price $1.75=3.4 difference divided by 2= $1.70 added to today=$3.45 1/2 retracement.
4. Strong Oil, Strong company, making money at oil $28+, no debt maturity until 2020, very marketable assets up for sale at very crc beneficial prices, debt to be paid down.
5. Company is clearly in better position now than when the stock was significantly higher months ago.
6. Moronic shorts who have not covered will be forced to and drive the price up.
7. Reverse split will reduce the available shares by 10 to 1, alot of money chasing limited amount of shares = big run up!
This will migrate to $3.50 prior to split, then to $40 post split ($4.00 equivalent) this is representative of prior moves when oil rally's and this breaks out to new highs. No debt due until 2020. Living within means. Very attractive asset base. Potential asset divestiture any time now. Debt reduction and stronger balance sheet. This is the best value and best levered company to a higher oil price. Foolish not to own this under $2.
Some inexperienced investors seem to think that reverse splits are bad for stocks. CYTX is in no way related to CRC except that CRC has planned at 1 for 10 reverse split at the end of the month and CYTX just completed a 1 for 15 reverse split and is up 36% in one day. To the individuals who claim that reverse splits doom a company, this is one example that proves it surly does not.
Reverse split is most commonly positive and this is just one of many examples. The float is reduced to a level that can move an already depressed stock up in a very significant way.
This is the technical pattern this stock is currently in. This price movement is clearly not fundamental. If it was trading on fundamentals, with oil at $47, the stock would be over $3.50. The technical pattern shows that the stock has formed a base here and will soon start its upward move to just about $3.
Of course, and that is what drives it up, supply and demand. Look at ICPT, went from $60 to $460 in 3 days a few years ago, the power of a low float. If a stock has potential for a 500% return, ALL managers want it in there portfolio.
First, percentage wise, its the same return regardless. A $2 dollar move post split is a .20 cent move pre-split, with a lower float, the stock would theoretically move the same amount or more post split. Second, if you only have $2,000 invested, maybe you should own more.
This is one of the best levered companies to an oil recovery that exists today. The company currently has 308 million shares outstanding going down to 38 million. With a higher price, institutions will be able to purchase and position this stock now. The majority of institutions are extremely underweight energy and need to start to build back positions now that oil has recovered and the summer demand is going to meet lower production. What was the avoid trade will be the necessary trade. The majors are all crowded and already at fair value. they will have to look to the smaller cap plays to add alpha and realize value. There are few better plays now than CRC. They have already solidified their balance sheet, they will soon be divesting more assets and potentially purchasing their own debt back at cents on the dollar. Once institutions start building positions, if it is post split, there will be less shares to accumulate as the float is now one tenth. This will cause a major upside as lots of money chasing very few shares. That coupled with a recovery in oil will send this skyrocketing. Under these circumstances, they made the right call on the reverse split. See you at $5 or $500!
First, show me another oil company that has the same operating cash flow q1 of 2016 as they did q1 of 2015 when oil avg price was over $50. Second, they are managing the downturn fantastically. Third, They are telegraphing a asset sale to reduce debt and possibly buy back their own debt at cents on the dollar. Last, 1 for 10 reverse split will decrease the number of outstanding shares, reduce volatility and psychologically give the impression that its a higher priced stock. Institutions can only purchase equities over certain prices, $5 and $10 are common thresholds. Also, most brokerage's will not allow you to margin a stock under $3, so this adds further liquidity and more potential investor money. Now that oil is not in the 20's any longer and the bias is up going into summer demand and lower production, the potential for deals has never been better as larger cap companies with cash will be looking to acquire quality assets at a reasonable price. This will allow them to divest some of their assets, also at a reasonable valuation and reduce their debt significantly which in turn will allow them to start to ramp up production. Their hedges are going also reinforce the strength of their recovery and guide this back to $5 pre split as oil will approach $50.
Living well within means. Same operating cash flows as prior year same quarter. Assessing all options to improve leverage. Reducing cost, protecting margin, managing base production. Reverse spilt 1 for 10 May 31st. All good!
No one is expecting any huge surprises on earnings but the conference call will further clarify several points. The analysts always ask about the progress of the deleveraging transactions and this should be a positive. they will ask about covenants and this will also shed some light on balance sheet health. Credit line will be more than sufficient and they should reiterate the $28 break even. All in all this should be extremely positive for the stock and analysts should be more apt to upgrade the stock on the information. This should send the stock over $3 on the way to $4 regardless of the earnings.
It means one is coming, they probably have one on the table and had to restructure the language to be compliant with the terms of the deal. A deal announcement will lower debt by requirement. As an added bonus, they can use proceeds to purchase back their own debt at cents on the dollar further strengthening their balance sheet and should be a huge boost for the stock. $4 on first deleverage transaction.
From the filing:
On April 22, 2016, we amended our Credit Agreement, dated as of September 24, 2014, as previously amended February 25, 2015, November 2, 2015 and February 23, 2016. The amendment makes technical changes to facilitate certain types of deleveraging transactions.
A copy of the amendment is filed as Exhibit 99.1 to this report.
There is a disconnect that needs to revert to the mean. Theoretically, if oil was at this price on 11/10/15 and CRC was at $4.93 on the same day, then I one should logically deduce that we should be either at $4.93 or close to it. Hold to at least $4.