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QEP Resources: An Opportunity Now Awaits

Jun. 08, 2020 3:02 AM ETDiamondback Energy, Inc. (FANG)6 Comments


  • The management team at QEP Resources just struck an interesting deal with its credit facility lenders.
  • This move will serve to create an interesting opportunity for the firm and its investors.
  • If this is exercised to its fullest extent, it could create hundreds of millions worth of savings over time.
  • Looking for a helping hand in the market? Members of Crude Value Insights get exclusive ideas and guidance to navigate any climate. Get started today »

Times have been tough for many players in the oil and gas industry. QEP Resources (QEP) has been no exception. Recently, rising energy prices have helped to alleviate concerns over the company’s ability to survive in the long run, but there are still issues that investors need to contend with. In an effort to create value for its shareholders and to reduce the probability of an eventual restructuring, the management team at the firm struck up an innovative and logical deal with its credit facility lenders. This arrangement, while not without precedent, doesn’t happen often and it could result in the firm saving its shareholders hundreds of millions of dollars over time.

A look at the deal

Credit facilities can be a valuable lifeline for companies, particularly those as capital-intensive as oil and gas firms. As valuable as they can be, though, they can also be dangerous. Restrictive covenants can lead to financial pains, especially when market conditions change, and the ability for lenders to change the goal posts regarding how much can be borrowed at any given time (through what are generally bi-annual re-determinations) can lead to the borrowers being pinched to pay down debt. This double-edged nature to credit facilities likely explains why management had no outstanding borrowings under its facility as of the end of its latest quarter. Any sort of amendment made to a credit facility that can ease up on its restrictions can be a boon for business. This is what we are seeing today regarding QEP Resources.

Instead of re-stating, more or less verbatim, all of the details of the amendment the company struck with its lenders, I figured it would be better to post the image above, which provides, in management’s own words, precisely how things are going to change. There’s a lot to unpack here, but the best way to

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This article was written by

Daniel Jones profile picture

Daniel is an avid and active professional investor.

He runs Crude Value Insights, a value-oriented newsletter aimed at analyzing the cash flows and assessing the value of companies in the oil and gas space. His primary focus is on finding businesses that are trading at a significant discount to their intrinsic value by employing a combination of Benjamin Graham's investment philosophy and a contrarian approach to the market and the securities therein. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (6)

SilverSun profile picture
I got amazing profits from this one, doubled down at $0.35 , sold Friday half of my position.
A Daniel Classic: “... the ability to move paper around”
QEP Price January 2 2020 = $4.45

QEP Price ~April 3 2020 = $0.36

QEP Price June 5 2020 = $1.70 (and this price includes $0.70 gain on June 5)

Magically, article on SA comes out over June 6 weekend saying QEP is now attractive and presents upside opportunity. Really? Well, yeah, sure. I guess anything is possible.

Might have been if author could have produced this article earlier, but somehow the the 3 month (12 week) period of March 11 till June 4 was not enough time.

Good luck with your day-trade.
Good comment. Kind of like, closing the barn door--after the horse has taken off... BTW: as of this morning QEP per share price is: $2.47. But, the question is: Does it have room to run? Is is a good investment??

I think it is still a buy. Personally, I am up 175% with QEP so far; and I think it will run to 4.00+ by the summers end.
Thermalsight profile picture
Give the guy a break. He analyzed an announcement that came out June 4th and had it in an article on June 7th. How could he have pre-analyzed and reported on what was clearly company private information?
@manlystanley well we both were wrong. Down to 1.15
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