The oil and gas industry is rapidly losing the profitability and financial stability with which it was associated for long. The last ten years witnessed a steady drop in profits and revenues, diminishing cash flows, rising bankruptcies, erosion of stock prices, and many more financial adversities.
However, there are hidden gems in this aging industry that need to be extracted and highlighted. One such company is Camber Energy (CEI), formerly known as Lucas Energy. The company is engaged in crude oil and natural gas exploration and sale. The stock is gaining strong traction, growing 403% over the past 12 months. (See Camber stock chart on TipRanks)
Camber is focused on improving its business and financials. Recently, the company dismissed its auditor and hired a new accounting firm, announcing that all audited financial statements after September 30, 2020, were faulty.
In an attempt to keep itself relevant in the transitioning environment, on August 24, Camber’s subsidiary Viking Energy, inked an agreement with ESG Clean Energy. The agreement allows it to access ESG’s patent rights and knowledge related to stationary electric power generation. The agreement will enable Camber to access methods to utilize heat and curb carbon dioxide, among other things.
Notably, the ESG Clean Energy System generates clean electricity from internal combustion engines by leveraging the excess heat to capture almost all of the carbon dioxide emitted from the engines. The process is also designed to allow the production of precious commodities, including distilled/ de-ionized water, urea, ammonia, ethanol, and methanol. Therefore, this agreement will give a major boost to Camber’s business.
James Doris, President and CEO of Camber, said, “In my view, this transaction positions us as an industry leader in terms of being able to assist with the power generation needs of commercial and industrial organizations while at the same time helping them reduce their carbon footprint to satisfy regulatory requirements or to simply follow best ESG-practices.”
This announcement was a major development that sent the stock price soaring more than 720% to date.
Nonetheless, it is important to note that like its peers in the oil and gas industry, Camber is also burdened with a highly leveraged balance sheet, as observed from its last annual report. Importantly, it seems like the financial pressures of the companies serving the oil and gas industry will only increase over the forthcoming years, as the world transitions to clean energy. With renewable power getting cheaper, the market share of fossil fuels is slowly withering. Growing traction in electric vehicle sales, increased plastic recycling, new technologies, and other such environment-focused changes will inevitably shift demand away from oil and gas, as the world grows more aware of the severe climate crisis.
Having said that, there is a good chance of Camber withstanding and overcoming the gradual obsolescence of fossil fuel-based businesses and financial difficulties if it continues to pursue strategic initiatives to remain relevant in the changing industry.
Camber competes with stalwarts like ConocoPhillips (COP), Marathon Oil (MRO), and EOG Resources (EOG). Its performance this year has been the lowest out of all four stocks.
I have a neutral stance on this company’s prospects, as it is yet to release properly audited quarterly earnings reports, which will throw light upon its recent developments, internal challenges, efforts, and future plans.
Wall Street is yet to initiate ratings on this stock and it will be interesting to see what analysts think about Camber’s prospects.
Nonetheless, News Sentiment for Camber is Neutral, based on 20 articles over the past seven days. Half of the articles have Bullish sentiment, compared to a sector average of 65%, and the other half have Bearish Sentiment, compared to a sector average of 35%.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
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