Some investors get nervous when they see E&P companies selling
acreage, but I suspect that may be due to a basic misunderstanding of
how oil and gas companies create value. Acreage and reserves are
definitely a critical part of long-term production and profit growth,
but "acreage at any cost" has to be tempered with profitability and
liquidity. I think Abraxas Petroleum (AXAS)
has been making a lot of good decisions in 2013, shoring up a
once-stretched balance sheet by selling off non-operating acreage in
non-core areas and focusing its attention on its Bakken and Eagle Ford
properties where the company has been seeing surprisingly good results
given the previously assumed quality of the acreage.
Looking into
2014, Abraxas has a cleaner balance sheet and a tighter operating focus.
Large acreage positions in areas like the Niobrara and Duvernay give
some optionality to long-term development (or sale) plans, while a
focused drilling program for 2014 should support the solid execution
that the company has been displaying recently. Valuation has me a little
cool on this name right now, but I'd definitely keep an eye on it and
reconsider if the stock were to pull back to the $3 area.
Please read the full article here:
A Cleaner, Tighter Abraxas Petroleum Ready For 2014
No comments:
Post a Comment