Compton Petroleum CEO Buys Company Stock - Positive but Typical

It never hurts to see senior management at a company you’ve invested in buy stock. Hopefully, they aren’t doing it simply because of a depressed valuation but it is a vote of confidence either way.

Shareholders of Compton Petroleum Corp. (CMZ), which was a C$13 stock this past summer but has since fallen to about a buck, should get some solace from an investment by the incoming CEO.

Timothy Granger, who takes over the top job on Jan. 26, bought 90,000 company shares for prices ranging from C$1.05 to C$1.11 between Jan. 6 and Jan. 19.

The move is probably a sign that he considers the stock undervalued but it is also somewhat typical for an incoming CEO, according to one analyst that asked not to be named. So while it is a positive sign, it is not a significant investment considering where Compton is trading, the analyst added.

The company pulled itself off the sales block at the end of October after failing to find a suitable buyer. This didn’t help its falling share price, which was also suffering as a result of declining energy prices.

“As with most of its junior producer peers, Compton will restrain capital spending to within cash flow until equity and credit markets improve,” UBS analysts said in a recent report.

While they have a somewhat anti-consensus view that Compton is not in a liquidity squeeze given its C$240-million available on a C$500-million credit facility, the analysts said its valuation is likely to remain depressed until commodity prices and production growth can be restored.

UBS said:

As the company high grades its opportunities, focusing on regions offering the most attractive economics, we believe it will emerge in good shape on the other side of this downturn.