Arena Resources: Good Chance for Sharp Gains

While it isn't one of the "heavy hitters" in the oil & gas industry, Arena Resources, Inc. (ARD) still benefits from the favorable – in fact, enviable – conditions in that lucrative sector. This gives ARD a better chance than most to make sharp gains in share price moving forward, and analysts are backing up that possibility.

With only four analysts covering the stock, ARD is relatively under-represented for its robust industry. However, all four of those analysts raised estimates in the past month, sending expectations for this year higher by 22% to $2.22 from $1.82.

Perhaps even more important from an Aggressive Growth standpoint, analysts currently expect next year's earnings at about $3.03, which would mark an advance of 36% over this year.

Don't Forget the Development Program…

Much of the enhanced earnings estimates can be attributed directly to a strong first-quarter performance, in which ARD performed like an oil & gas company should – only on a smaller scale.

Oil & gas revenues reached approximately $45.3 million in the quarter, which was more than 170% better than the previous year's $16.7 million. The company, of course, benefited from increased commodity prices, but also from its ongoing development program, which helped in its record production.

Total production rose 54% year over year to 517,042 barrel of oil equivalents (BOEs), which was also up 17% sequentially.

Meanwhile, earnings per share of 51 cents topped the consensus by 8.5% and was approximately 170% better than a year earlier.

New Mexico

In its first-quarter report, Arena Resources stated that it is evaluating several acquisition opportunities that could complement its core properties.

Yesterday, the company announced that it finalized the acquisition of a property in Lea County, New Mexico for about $10.3 million. The company's initial reserve estimates indicate that the properties could have 1.2 million BOEs of proved reserves net to Arena.

The company said it will be “very active” in New Mexico during the second half of the year.

More on Arena…

Arena Resources is an oil and gas exploration, development and production company with current operations in Texas, Oklahoma, Kansas and New Mexico.

Comments

[grs44:]

I love Arena Resources, ARD. It is all domestic production, which means they take full advantage of the weakened dollars inflated oil prices. Their reserves are undervalued by the market, they have proven and experienced managment in place, a small cap and growing, and a proven winner. This stock does move with the price of oil, but they will produce good numbers with oil falling. But it will move in lock step with oil, such is life. A big run on the stock, but ARD has room to grow. If you want a pure oil play, with no distribution or refinery exposure, this is one to look at.

2008 Jun 09 09:09 AM

[Clavis:]

Hmmm, have to have a look, thanks grs44.

2008 Jun 10 05:54 AM

[User 207828:]

I have owned my shares of ARD for over 3 years. It has reached my initial long term target of $100 before the split. I have a 10 bagger in 3 years. My new target is $100 within 3 more years as I don't expect oil prices to hold where they are for too long. The reason I was interested in this stock when earnings and growth was just a plan was three fold. The management had built another oil company from nothing and sold it at a big gain to the shareholder, 2) The management drew low salarys of about $38 K per year and no bonus (they owned stock and stock options for their compensation), and 3) All the oil is in the USA so if the flow from the mideast is interrupted it will not hurt ARD at all. This is the best investment I have ever made.

2008 Jun 10 02:54 PM