Abraxas Petroleum (AXAS, Financial) reported strong numbers in the fourth quarter with year over year growth in both revenue and adjusted earnings. Albeit slow, the oil producer is making improvement on its share price, which is inching upwards. The company has strong fundamentals and being established for more than three decades has faced the plummeting oil prices even before, which gives it an edge over some of its peers who have entered the market recently. On the back of these facts let’s see how the company is doing and the factors that could impact its performance in the days ahead.
The strong performance should continue
During the quarter, its revenue increased to $31.19 million from a year ago, while earnings adjusted for non cash items came at 6 cents a share compared to a loss of 1 cent last year. The numbers are quite encouraging on the back of falling oil prices and the management hopes to continue this trend in the future as well. Its strongest assets are the oil wells, which the company is continuously expanding.
In this direction, Abraxas recently completed the drilling of four wells on the Jore Federal West pad at extremely lower costs. Since the company owns about 76% working interest in these wells it will have a considerable impact on its financials. Additionally, it also completed drilling of three wells at Stenehjem pad and all of them are working above its recently upward revised type curve.
Moving on to its Eagle Ford location, Abraxas continues to expand its opportunities in this region. However for now it has slowed down a bit because of the depressing oil prices.
Going forward, the management is counting on its rationalization activity, which is expected to yield strong results in the coming months. Along with this, it has an upper hand in financial flexibility and the fact that it owns 100% of all its Eagle Ford properties, which will prove beneficial when the macro economic factors improve.
Conclusion
The company currently has a trailing P/E of 3.01 with no improvement in its forward P/E at 16.42. Although its stock had been improving but the numbers are not quite favorable. Therefore in the light of these facts it seems prudent for investors to avoid this stock for the moment.
