Josh Young
Hedge fund manager, energy, value, special situations

Barrons Recommends Approach Resources, But Better Value Elsewhere?

Barrons recommended Approach Resources (NASDAQ:AREX) stock recently. It suggested that Approach has a very low cost basis for its Permian acreage relative to recent values achieved in joint ventures in "similar land". And it pointed to a "solid balance sheet", "plenty of liquidity", good Wolfcamp results, comments by the CEO, and growing earnings to suggest Approach might be a buyout candidate in the high 30's, versus a recent price of ~$25 per share.

However, the Approach story is more complex and there may be (substantially) better value elsewhere. Below I dissect Barron's arguments point by point. And then, I approach valuation from other perspectives not directly addressed, which are more appropriate for oil and gas companies than earnings....

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