I have owned oil and gas company Warren Resources (WRES) since June when it was trading at $2 a share. The stock has been on the move recently on the back of some positive catalysts, and it has busted through the $3 a share level over the last week. WRES has solid momentum here and I think it could approach $4 a share or higher in the near future.
Here are some recent positives for WRES:
- Sidoti initiated the shares as a "Buy" last week with a $5 price target.
- Two insiders both just made separate 10,000 share purchases.
- Natural gas prices have had a nice recent run and are approaching $4 MMBtu, a sharp increase from under $2 MMBtu earlier in the year.
Warren Resources is an independent oil and gas producer. The company holds interests in various properties that are located in California, Wyoming, New Mexico, North Dakota, and Texas.
Here are four additional reasons why WRES is going higher from just over $3 a share:
- Consensus earnings estimates for both FY 2013 and FY 2014 have gone up significantly over the last 30 days. The consensus earnings estimate for FY 2014 has more than doubled over the past 90 days.
- The company is now trading at less than 7.5x 2014's projected earnings and less than 4x operating cash flow. It also trades at just 22% over book value.
- The company sees FY 2013 oil production at 1,125 MBbl to 1,225 MBbl and total oil equivalent production at 2,125 Mboe to 2,308 Mboe. In its last reported quarter, revenue increased 17% year over year. The stock trades with a five year projected PEG of under 1 (.97).
- The median price target on the stock is $4.50. Given its small market capitalization (around $300 million including debt), strategic assets, and growing production it could be an acquisition target for a larger player if M&A activity continues to be robust.
Disclosure: I am long WRES.