Miami, FL – December 4, 2018 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on Alta Mesa Resources, Inc. (NASDAQ: AMR).
Alta Mesa Resources Inc. (NASDAQ: AMR) stock has been taking a continuous beating for one reason or another this year and the slight rebound in crude oil prices were no help. The amount of drubbing that it has taken suggests that there continues to be a panic reaction even to the smallest negative news.
Key Updates
Down nearly 84-percent loss from its 52-week high, there are few reasons for such negative reaction from investors — for instance its debt, which costs close to 14 percent. And the fact that management has reduced its EBITDA outlook by over 60 percent to just $38 million.
With less than positive sentiments from investors, the question is, weather the drop in price is justified. The Company’s third-quarter net oil production jumped 50 percent to 33,400 barrels of equivalent (BOE) per day, while liquid production surged 72 percent. On a quarter-over-quarter basis, oil production grew 30 percent. Oil volumes per day increased 35 percent to about 16,700 barrels from the second quarter.
Guidance Reaffirmed
Kingfisher midstream system gas volumes grew 20 percent to 116 MMcf per day over the second quarter. The company reaffirmed its full-year production outlook of 29,000–31,000 BOE per day, while exit rate forecast is 38,000–40,000 BOE a day. The company has brought in more than 20 new multi-well patterns into production and expanded maximum development tactics for its asset base. The company will also continue to refine its development plans for 2019 to deliver optimum capital efficiency.
The company is keen on achieving its targets after it invested nearly $1.3 billion on its capital budget and acquisitions in 2018. The cash flow from operations however, has been a disappointment. But exploration and production requires huge capital, so a positive cash flow is key to funding future growth. Any absence of liquidity could pose serious issues to Alta Mesa Resources’ future plans. And oil price pressure could further impact results. Also, oil price plays a key part, and any downside pressures could impact its results.
Key Metrics
Production growth and plans could suggest that there is an overreaction to the company’s reduction in EBITDA outlook. However, the year-to-date plunge of more than 82 percent is not justified. The simple moving average of 20 days, 50 days, and 200 days indicated a drop of 37.95 percent, 50.19 percent, and 71.34 percent respectively, which could mean that the stock is under the firm grip of bears.
Rivals
Similar company, Anadarko Petroleum Corp (NYSE: APC) has a positive outlook for the year ahead. The company has done well on various fronts compared to Alta Mesa Resources. The company also has the highest PE in the last five years, 50.39, whereas the sector enjoys a PE of 36.08. As far as the lowest PE in the same period is concerned, it was 15.70 and 9.84, respectively. The price-to-sales (P/S) ratio of 2.69 for the trailing twelve-month (TTM) period is much lower than that of the sector and industry. However, price to book in the most recent quarter is 2.34 versus 1.84 and 0.69 for the sector and industry, respectively. Its price to cash flow for TTM is 10.85, which is much higher than the industry’s 6.10 and sector’s 9.52.
Conclusion
One of the main issues that will play a key role in turning around the company’s fortune is liquidity. It has liquidityof $564 million, suggesting that it could withstand any downside pressures in oil price. There are plans for the future, but execution will be key. The stock remains a “sell,” and it’s better avoided then accumulated at this point.
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