Today our predictions regarding the rebound have pretty much happened – COTY is back to it’s pre-dividend value and our portfolio in general is back to profitability.
Since we didn’t have to keep such a close eye on existing assets today we took a look at a variety of micro-cap energy issues for potential future investment. We mostly sifted through a range of companies generally referred to as the “oil-zombies”. These are US extractors and refiners that were decimated by low oil prices over the last few years, but for one reason or another didn’t liquidate enough assets to compromise future operations. The first of these companies to come to mind is always Chesapeake Energy (CHK), but there are a multitude of companies in that situation that for one reason or another haven’t drawn as much attention.
One we were very interested in is Rex Energy Corp (REXX), a State College PA based oil, NGL, and natural gas company. This company operates almost 100,000 acres in the relatively high operating cost Illinois basin in Illinois, Indiana, and Kentucky. They ended the day down 2.42% at $0.04838 per share – trading only 1.18 million shares throughout the day.
The reason REXX remains interesting is that while net revenue has fallen 20% over the last 9 months, production has only fallen 2%, and expenses have fallen 77%. This company may be able to streamline production enough to rise back into profitability, and if they do it would drive their stock price up at least 100%. Consensus estimates place sales over the next year up 50% from where they are now – enough to return this company to profitability.
We definitely wouldn’t advise taking any action on this issue yet – but it is absolutely a company worth keeping an eye on over the next few months. If oil prices continue to rise, the upside on this stock could be very substantial.