NEW YORK (TheStreet) -- Shares of Resolute Energy (REN) rose in early afternoon trading Wednesday after the company announced it had entered into an agreement with Highbridge Principal Strategies for a $150 million second lien secured term loan.
The loan matures no later than November 2019 and allows Resolute Energy to issue up to $200 million of additional second lien debt for 60 days after the initial closing.
Resolute Energy, an independent oil and gas company, has also altered its revolving credit facility as part of the second lien financing transaction.
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The company expects net proceeds from the loan to be approximately $134 million and intends to use the proceeds to repay a portion of the outstanding borrowings under the company's senior revolving credit facility.
Separately, TheStreet Ratings team rates RESOLUTE ENERGY CORP as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate RESOLUTE ENERGY CORP (REN) a SELL. This is driven by a few notable 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 generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio of 1.37 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.50, which clearly demonstrates the inability to cover short-term cash needs.
- 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, RESOLUTE ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $37.22 million or 19.76% 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.
- REN's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 87.70%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 6.7%. Since the same quarter one year prior, revenues slightly dropped by 5.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: REN Ratings Report