Energy Prospectus

San Antonio, Texas (June 20, 2014) – EnerJex Resources, Inc. (NYSE MKT: ENRJ, ENRJPR) (“EnerJex” or the “Company”), an independent exploration and production company focused on the acquisition and development of oil and natural gas properties located in the mid-continent region of the United States, announced today the closing of an underwritten public offering of 639,157 shares of its 10% Series A Cumulative Redeemable Perpetual Preferred Stock (liquidation preference of $25.00 per share) at a price to the public of $23.75 per share for gross proceeds of $15.2 million. The shares sold to the underwriters included 83,368 shares pursuant to a 45-day option that was exercised by the underwriters in full on June 20, 2014. Trading of the preferred stock commenced on June 17, 2014 under the symbol “ENRJPR” on the NYSE MKT.

The preferred stock is not convertible into common shares of EnerJex and no warrants were issued to the investors or underwriters in conjunction with the offering. The Company intends to use the net proceeds from the offering to accelerate the development of its oil and natural gas properties located in Kansas and Colorado, and for general corporate purposes, which may include temporary repayment of outstanding borrowings under its revolving credit facility.

I found out this morning from TD Ameritrade that their symbol for the ENJR preferred shares is "ENJR-". That's ENJR "dash"....with no "A" or "PR". Started a small position in it today.

EnerJex and a few other board favorites are presenting in Chicago tomorrow and Wednesday.
http://www.ghsecurities.com/pages/GHS100.aspx

EnerJex Resources trades as ENRJ (not ENJR as mentioned above).

Yahoo Finance shows the preferred as ENRJ-P and I see that is already trading above par ($25). I hope several of you were able to participate in the offering. I heard from a few who did and I know they got the shares under $24.

From time-to-time EPG members get a chance to participate directly in secondary offering or preferred share offerings like this. One of the benefits of being in a well-respected group of this size.

my bad, a typo.... I meant ENRJ- for the preferred .... thanks for correcting that Dan

apparatently this guy didn't get the word on the reverse split

Seeking Alpha
A 10% Monthly Yield That Investors Should Avoid

Jun. 27, 2014 7:44 AM ET | About: Enerjex Resources, Inc. (ENRJ)

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Summary
•EnerJex's new 10% yielding preferred may entice investors but the company is putting itself at risk.
•EnerJex's high leverage should concern preferred investors.
•The company has negative free cash flow making it difficult to make its preferred payments.

EnerJex Resources (ENRJ) is a small cap oil and gas E&P. EnerJex owns oil and gas leases over a 100,000 acre area spanning over four states. The company is a small cap with a market cap around $52 million.

EnerJex recently just issued its new series A preferred. The preferred yields 10% at par value. EnerJex raised $15.2 million in gross proceeds from this offering. The company plans to use the proceeds for further development of its O&G properties in Kansas and Colorado.

While it's good to see EnerJex is expanding, the problem is that the company is trying to grow too fast and has already begun to have cash flow problems. In FY 2013, EnerJex had cash flows from operating activities of $3.1 million. However, it had a capex of $7.85 million. In the last three years, the company has had negative free cash flow.

The fact that EnerJex is spending on capex is a good thing. Small O&G companies usually have negative free cash flow in the early stages due to expansion. The problem is that EnerJex's need for quick growth is causing the company to take on excessive amounts of debt.

For 1Q2014, the company reported total cash of $1.4 million and debt of $32 million. From 2Q2013 to 1Q2014, debt has ballooned from $11 million to $32 million. The amount of leverage is likely to increase over the next couple of years.

Now with the new preferred that's been issued, the company will have to pay the additional borrowing cost on that. This will cost the company around $1.5 million a year in dividends that have to be paid to preferred holders.

In my previous articles, I have mentioned that investors need to be cautious with double digit yields in this environment. The lack of attractive yield opportunities is continually causing investors to take on more risk. I believe this situation is no different.

I think EnerJex was actually able to lock in an attractive preferred yield given the company's risk. The company is taking advantage of this low rate environment. From a corporate standpoint, it's a good move on their end, but we need to look at this from an investment standpoint. I believe this preferred is simply not an attractive opportunity. The company's high leverage and lack of free cash flow will make it difficult to meet the preferred distributions in the future.


Editor's Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.