NEW YORK (TheStreet) -- Shares of Halcon Resources (HK) were gaining by 7.6% to $1.13 on Monday afternoon, as oil prices spiked higher after losses earlier in the day, continuing the commodity's rally from last week.
WTI crude oil for October delivery was up 8.03% to $48.85 a barrel Monday afternoon, and Brent crude oil for October delivery was up 7.57% to $53.84 a barrel.
Crude oil prices were rising due to data showing slowing U.S. oil production, according to Reuters. U.S. oil production reached about 9.6 million barrels a day in April and fell by more than 300,000 bpd over the next two months, the U.S. Energy Information Administration said on Monday.
The EIA also lowered its production estimates for the first five months of 2015 by 40,000 to 130,000 barrels a day every month, according to The Wall Street Journal.
Comments from the Organization of the Petroleum Exporting Countries that it is willing to talk to other oil producers about recent drops in oil prices also helped bring prices up Monday, according to Reuters.
On Friday Halcon Resources reached an agreement with creditors to reduce its long-term debt by about $548 million through a debt exchange.
Separately, TheStreet Ratings team rates HALCON RESOURCES CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate HALCON RESOURCES CORP (HK) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity, weak operating cash flow, generally high debt management risk and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 1513.3% when compared to the same quarter one year ago, falling from -$67.48 million to -$1,088.61 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, HALCON RESOURCES CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $123.60 million or 50.84% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The debt-to-equity ratio is very high at 10.56 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Even though the debt-to-equity ratio is weak, HK's quick ratio is somewhat strong at 1.04, demonstrating the ability to handle short-term liquidity needs.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 81.08%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1027.77% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: HK Ratings Report