Offshore oil and gas company Bonanza Creek Energy Inc (NYSE:BCEI) kicked off Wednesday’s session in the US at a little over $2.44 a share. By session close, the company was at $2.89, and gained to just shy of $3 a share during post session trading – a more than 18% gain across the day.
Why the gains, and what can we expect going forward?
For those not familiar with Bonanza Creek, it’s a Denver based company that specializes in the n the acquisition, exploration, development and production of onshore oil and associated natural gas. Its operations focus primarily on the United States, and more specifically, in its home state of Colorado and Arkansas. At last count, it had a market capitalization of a little over $143 million (putting it at the lower bracket of the small cap space).
So, getting to the gains. The company rose primarily as a result of the wider gains in the energy sector as a whole. Yesterday, the IEA and OPEC reported what’s expected to be the biggest output fall in crude in a quarter decade, and this suggestion translated into an immediate upside in crude, and concurrently, other energies such as natural gas and London brent. US crude is up more than 70% on January-February lows, and the industry as a whole is benefiting from this rise. Giants of the space, such as Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and Exxon Mobil Corporation (NYSE:XOM), also gained – but due to their large cap nature, not to quite the extent of the smaller players, of which bonanza is one.
So what are we looking for going forward? Well, if oil continues to gain, we expect Bonanza’s market capitalization to rise in tandem. Fast forward to May 5, and a big upside catalyst is the company’s first quarter earning report. Bonanza management gave markets some nice upside revisions earlier this week, so we’re looking to the release to compound the wider energy gains and boost the company further as we head into the mid stages of the second quarter.
DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.
