AREX is down almost 11%
AREX is down almost 11%
They reported their earnings yesterday missing by a penny, but beat on revenues. Have you had a chance to look at that one? I'm starting to feel some real pain with some of my holdings.
Re: AREX is down almost 11%
I just finished updating CRZO. I will take a look at AREX next, then UNT.
Looks like everything is down today. I see that WTI is down $1/bbl, but it looks like support around $97 is holding. Actually, if $97 holds IMO that is very bullish. I see VERY STRONG support for WTI at $96.
Some of the dip in oil prices has to do with a stronger U.S. dollar.
Looks like everything is down today. I see that WTI is down $1/bbl, but it looks like support around $97 is holding. Actually, if $97 holds IMO that is very bullish. I see VERY STRONG support for WTI at $96.
Some of the dip in oil prices has to do with a stronger U.S. dollar.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: AREX is down almost 11%
On the surface it all looks very good.
Approach Resources Inc. (AREX) today reported results for second quarter 2014. Highlights for second quarter 2014 include:
• Production was 1,286 MBoe, or 14.1 MBoe/d, a 58% increase over the prior-year quarter and a 19% increase over first quarter 2014 [beat my forecast]
• Revenues were $73.4 million, a 74% increase over the prior-year quarter [beat my forecast]
• Net income was $3.8 million, or $0.10 per diluted share
• Adjusted net income was $8.7 million, or $0.22 per diluted share [hit my forecast on the nose]
• EBITDAX was a quarterly record of $50.6 million, or $1.29 per diluted share, and up 65% over the prior-year quarter
• Production outlook for 2014 increased to 4,950 MBoe [obviously very good news]
Approach Resources Inc. (AREX) today reported results for second quarter 2014. Highlights for second quarter 2014 include:
• Production was 1,286 MBoe, or 14.1 MBoe/d, a 58% increase over the prior-year quarter and a 19% increase over first quarter 2014 [beat my forecast]
• Revenues were $73.4 million, a 74% increase over the prior-year quarter [beat my forecast]
• Net income was $3.8 million, or $0.10 per diluted share
• Adjusted net income was $8.7 million, or $0.22 per diluted share [hit my forecast on the nose]
• EBITDAX was a quarterly record of $50.6 million, or $1.29 per diluted share, and up 65% over the prior-year quarter
• Production outlook for 2014 increased to 4,950 MBoe [obviously very good news]
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: AREX is down almost 11%
Approach Resources (AREX): An updated Net Income & Cash Flow Forecast model has been posted under the Watch List Tab.
Their 2nd quarter results beat my forecast model on production, top line revenues and operating cash flows per share. All looks good. They raised their 2014 production guidance and I think they will raise it again.
My Fair Value Estimate went up by $0.50/share to $31.50.
First Call's Price Target is $26.00/share.
I know it can really freak you out when you see a big drop in the share price after they release quarterly results. First look at what the whole sector is doing. Today everything is red, which means there is probably nothing specifically wrong with AREX.
Keep in mind that small-caps have "high beta"; they move a lot faster than the large-caps with a lot of float.
Second, look at the trading volume. At noon it was already 3X their average trading volume for a day. AREX only has 39.4 million shares and fairly small float. The large block trades right at the open were probably some fund manager that over-reacted to the reported earnings of $0.10 compared to First Call's estimate of $0.23. First Call's forecasts must always be compared to "Adjusted EPS", which came in at $0.22 (hardly a big miss). [by now you should know that EPS don't mean much for E&P companies. AREX CFPS is solid and going up. The beat my CFPS forecast for Q2 by $0.10/share.]
Third, this is a "nervous market" that seems to be over-reacting to the wrong stuff. For small-cap E&P companies like AREX it is all about production, proven reserve growth and having running room in good plays. AREX has all the right stuff, which is why I put it in our Small-Cap Growth Portfolio.
Go take a look at row 46 of the forecast model. It will tell you why I like AREX.
Their 2nd quarter results beat my forecast model on production, top line revenues and operating cash flows per share. All looks good. They raised their 2014 production guidance and I think they will raise it again.
My Fair Value Estimate went up by $0.50/share to $31.50.
First Call's Price Target is $26.00/share.
I know it can really freak you out when you see a big drop in the share price after they release quarterly results. First look at what the whole sector is doing. Today everything is red, which means there is probably nothing specifically wrong with AREX.
Keep in mind that small-caps have "high beta"; they move a lot faster than the large-caps with a lot of float.
Second, look at the trading volume. At noon it was already 3X their average trading volume for a day. AREX only has 39.4 million shares and fairly small float. The large block trades right at the open were probably some fund manager that over-reacted to the reported earnings of $0.10 compared to First Call's estimate of $0.23. First Call's forecasts must always be compared to "Adjusted EPS", which came in at $0.22 (hardly a big miss). [by now you should know that EPS don't mean much for E&P companies. AREX CFPS is solid and going up. The beat my CFPS forecast for Q2 by $0.10/share.]
Third, this is a "nervous market" that seems to be over-reacting to the wrong stuff. For small-cap E&P companies like AREX it is all about production, proven reserve growth and having running room in good plays. AREX has all the right stuff, which is why I put it in our Small-Cap Growth Portfolio.
Go take a look at row 46 of the forecast model. It will tell you why I like AREX.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: AREX is down almost 11%
This one is starting to get pretty cheap with a PE of 9.83 and a PEG of 0.562, but nobody's buying. I noticed a short interest of over 21%.
Re: AREX is down almost 11%
Since mentioned here the last time (Aug 7th) AREX lost another 33% (from $18 to 12)... and this although they are considered a low-cost producer (if I remember correctly)
Dan,
I understand that you probably get bombarded with emails and phone calls these days... but I would certainly appreciate a brief update on AREX...
Thank you!
cheers - Laurin
Dan,
I understand that you probably get bombarded with emails and phone calls these days... but I would certainly appreciate a brief update on AREX...
Thank you!
cheers - Laurin
Re: AREX is down almost 11%
...and now 40% down since early August.
Jeez...
Jeez...
Re: AREX is down almost 11%
An updated Net Income & Cash Flow Forecast model for Approach Resources (AREX) has been posted under the Watch List tab.
3rd quarter results will be good, with EPS near the current First Call estimate of $0.23 with CFPS over $1.10. Reported earnings, which will include mark-to-market adjustments on their hedges, will be much higher than what First Call estimates.
At the bottom of the forecast model spreadsheet you can see the hedges they have in place. For Q3 and Q4 they have 5,000 BOPD hedged with collars that have floors ranging from $85 to $90. 5,000 BOPD is ~80% of their 2nd half production. They have 4,100 BOPD (over 60% of forecast production) hedged with collars that have $84-$85 floors for the first quarter of 2015.
They also have quite a bit of their natural gas hedged at over $4.00.
I think First Call's Price Target of $22.44 is a reasonable valuation for the company today, but that doesn't mean the share price will rebound to that level considering all the FEAR in the market today.
A reminder to all of you: All of the forecast models on the website have macros built in. You can download them to Excel and change the commodity prices at the bottom to see how it impacts earnings and cash flows.
3rd quarter results will be good, with EPS near the current First Call estimate of $0.23 with CFPS over $1.10. Reported earnings, which will include mark-to-market adjustments on their hedges, will be much higher than what First Call estimates.
At the bottom of the forecast model spreadsheet you can see the hedges they have in place. For Q3 and Q4 they have 5,000 BOPD hedged with collars that have floors ranging from $85 to $90. 5,000 BOPD is ~80% of their 2nd half production. They have 4,100 BOPD (over 60% of forecast production) hedged with collars that have $84-$85 floors for the first quarter of 2015.
They also have quite a bit of their natural gas hedged at over $4.00.
I think First Call's Price Target of $22.44 is a reasonable valuation for the company today, but that doesn't mean the share price will rebound to that level considering all the FEAR in the market today.
A reminder to all of you: All of the forecast models on the website have macros built in. You can download them to Excel and change the commodity prices at the bottom to see how it impacts earnings and cash flows.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group