See feature articles below: Bonanza Creek Energy, Inc. (NYSE: BCEI)
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Report For: Bonanza Creek Energy, Inc. (NYSE: BCEI)
Shares of BCEI got a bounce today as investors may think the shares are oversold. BCEI shares have tumbled as the company’s credit line was cut by more than half by its lenders. The shares have rebounded 28% today, trading at $2.67
A disclosure that it’s overdrawn its suddenly smaller credit line has sent Bonanza Creek Energy shares into a tailspin.
The stock recently traded 34% lower at $2.07.
That’s bad news for investors who bought shares of the oil and gas producer in follow-on stock offering in February of 2015. They paid $26 a share in that offering, which came amid a flurry of similar stock offerings from beleaguered oil and gas producers and raised about $209 million for Bonanza Creek. The Denver company at the time said it would use the proceeds to pay down its credit line.
About a year later, however, as low oil and gas prices took their toll, Bonanza Creek drew down its bank credit line by $209 million. When its lenders reassessed the company’s credit line this month as part of industry-wide twice-annual collateral review, Bonanza Creek’s lenders cut the company’s available credit to $200 million, from $475 million.
Bonanza Creek said in a securities filing that the cut has left it overdrawn by $88 million and that the company is working with its lenders to figure out how to pay back that amount.
A Bonanza Creek spokesman declined to comment.
The situation highlights some of the risk investors assumed last year when they bought more than $18 billion of stock from North American energy producers as oil prices plunged. Many investors were counting on a quick rebound in oil prices. Instead, prices have remained in a prolonged slump, pushing some last year’s issuers into bankruptcy.
Proceeds from 2015 stock sales weren’t enough to keep Emerald Oil Inc. and Goodrich Petroleum from filing for bankruptcy protection this year. Many other of last year’s issuers have underperformed, resulting in big losses for those who bought their shares last year.
Appetite for follow-on deals has remained strong this year and, at about $14.3 billion of new shares sold through Monday, may eclipse last year’s record. But this year the sellers have tended to be large companies seeking to pad their coffers and preserve investment-grade credit ratings or ascendent energy producers selling shares to fund acquisitions.
Source – Wall Street Journal / Ryan Dezember
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