Bonanza Creek Energy, Inc. (BCEI) is cashing in on higher crude prices and strong demand. This Zacks Rank #1 (Strong Buy) is expected to see earnings jump nearly 300% in 2018.
Bonanza Creek is a small cap exploration and production company headquartered in Denver, Colorado. With a market cap of $720 million, it has operations in the Wattenberg Field in Colorado and the Cotton Valley sands of Southern Arkansas in the Mid-Continent.
Another Beat on EPS and Production Guidance
On May 8, Bonanza Creek reported its first quarter results. It easily blew by the Zacks Consensus Estimate, reporting $1.07 versus the consensus of $0.71 which was a beat of 50.7%.
It beat its first quarter production guidance estimate, reporting 16.8 MBoe/d versus the guidance range of 16.0-16.6 MBoe/d. That was due to strong new well completions and consistently low line pressures on the company's Rocky Mountain Infrastructure system.
Production, however, actually fell 5% year-over-year due to minimal drilling and completion activity throughout the first half of 2017.
The product mix for the first quarter was 59% oil, 17% NGLs and 24% natural gas.
Crude was 81% of total revenue.
Net revenue jumped to $64.2 million from $52.6 million in the first quarter of 2017 thanks to increased commodity price and greater oil-weighted production.
Oil averaged $57.89 per Bbl versus $48.59 in the year ago period.
The Mid-Continent was cash flow positive in the first quarter with 3.0 Mboe/d of production.
Strong Balance Sheet
Investors need to pay attention to the balance sheets of the energy companies as it's been tough the last few years.
At the end of the first quarter, Bonanza had liquidity of $182.5 million including cash on hand of $5.8 million and $176.7 million in borrowing capacity under its credit facility.
As of May 8, it had no outstanding term debt and had just $15 million outstanding on its credit facility.
Huge EPS Gains Expected in 2018
With crude surging above $70, it's not surprising that analysts believe Bonanza is poised to cash in.
1 estimate was raised in the last week for both the second quarter and 2018.
The second quarter Zacks Consensus Estimate jumped to $1.26 from $0.97.
For the year, the Zacks Consensus rose to $5.32 from $4.52 over the last week. That's earnings growth of 293% as it made only $1.34 last year.
Shares are Still Cheap
The energy stocks finally caught a bid in 2018.
Bonanza shares are up 29% year-to-date but they're still cheap due to the surge in earnings.
It trades with a forward P/E of just 6.9.
While the Permian Basin exploration companies get all the glory, due to the infrastructure issues, the non-Permian companies may actually be better positioned in 2018 to cash in on higher crude prices.
For that reason, Bonanza is one of the energy stocks you should definitely have on your short list.
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