Two years of lower oil and gas prices spurred this Canadian exploration stock to undertake a series of cutbacks, including a reverse stock split that reduced its number of outstanding shares by 80%.
Bellatrix Exploration has stepped up spending this year and was rewarded with increased cash flow in the latest quarter. With productive properties, this penny stock has positioned itself to benefit as energy prices recover. The shares are up 7.5% in the past week.
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BELLATRIX EXPLORATION (Toronto symbol BXE; www.bellatrixexploration.com) produces natural gas (72% of output) and oil (28%) in Alberta, B.C. and Saskatchewan. The company’s major area of production is the Spirit River formation in Alberta, in which Bellatrix has drilled over 120 successful natural gas wells since 2009. It extracts both natural gas and light oil from the Cardium formation.
On July 6, 2017, Bellatrix consolidated its shares on a 1-for-5 basis. Big institutional investors, such as pension plans, generally avoid stocks that trade below $1, so the move could help the company keep those big shareholders.
In the quarter ended June 30 2017, Bellatrix produced an average 37,916 barrels of oil equivalent per day. While this is slightly down from 38,000 a year earlier, it is 10% ahead of the company’s average annual guidance of 34,500 barrels of oil equivalent. Cash flow per share rose by 4.9% in the quarter, to $0.21 from $0.20 (adjusted for the consolidation).
Penny Stocks: Exploration and development spending up while debt shrinks
For 2016, the company reduced its exploration and operating costs to conserve cash. Those savings let Bellatrix keep its production steady. In all, the company cut $321.4 million from its debt, lowering it by nearly 50%. Total debt now stands at $366.7 million. That’s still a high 2.0 times Bellatrix’s depressed $180.98 million market cap.
However, for 2017, the company is on target to spend $105.0 million on exploration and development, up 32.9% from $79.0 million in 2016. The higher spending should let it expand its output by 10% to 15% for the year.
Bellatrix’s higher production, plus significantly reduced interest expenses, should result in cash flow of $1.47 a share for all of 2017. The stock trades at 2.5 times that forecast.
Recommendation in Stock Pickers Digest: Bellatrix Exploration is a buy for aggressive investors.
For our views on how to invest wisely in penny stocks, read 14 tips for investing in TSX penny stocks without losing your shirt.
For our recent report on a penny stock we rate as an aggressive buy, read Amerigo Resources gets a rise from copper.