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I have been pounding the table on a small E & P concern, Abraxas Petroleum (NASDAQ:AXAS), all summer on both Seeking Alpha and as a daily contributor on TheStreet.com. In that time the stock has moved from $2 a share to over $3 a share. However, based on the stellar results the company just released during its quarterly report, AXAS still has plenty of upside.

Earnings results:

  • The company posted earnings of 9 cents a share, almost doubling the consensus expectation of a nickel a share.
  • Revenue came in at $29.1M, more than 10% over the consensus estimates.
  • BOE/D (Barrels of Oil equivalent/Day) was up 16% from the second quarter.
  • Even better, oil volumes were up 32% in the quarter and up 54% from the same period last year.
  • Finally, management guided 2013 production to average 4,400-4,500 BOE/D and is maintaining its previously announced targeted exit rate of 5,300 BOE/D.

Company Overview:

Abraxas Petroleum is a small (~$400mm enterprise value) E&P concern with acreage in most of the core shale producing ranges in the United States. Its main focus for growing production is currently in the Bakken and Eagle Ford shale formations.

5 additional reasons AXAS can climb from $3 a share:

  1. Consensus earnings estimates for FY2014 were already increasing consistently over the past three months. After this substantial earnings beat, look for these estimates to be taken still higher in the next week or two.
  2. Earnings are exploding at Abraxas. After being slightly better than break even last year, the company is on track to post ~20 cents a share in earnings for this fiscal year. Consensus is for just a bit more than 30 cents of EPS in FY2014, but this will probably increase a few pennies a share by the end of the month.
  3. The company is tracking to better than 40% revenue growth this year. Analysts currently expect additional sales gains of ~35% in FY2014.
  4. Despite its impressive growth in earnings & revenues, the shares are priced at less than 10x forward earnings. This is a substantial discount to its five year average (20.4).
  5. Despite rising some 50% over the last few months, insiders are keeping their shares. In fact, they have been net buyers over the last six months.
Source: Abraxas Petroleum: $3 Energy Play Is Going Higher