Emerald Oil (EOX) Stock Surging After Scrapping Public Offering

NEW YORK (TheStreet) -- Shares of Emerald Oil (EOX) were surging, sharply up 15.36% to $6.01 on heavy volume in midday trading Wednesday, after the company elected not to proceed with its previously announced public offering of common stock.

The company pointed to the "current market environment and associated dilution to existing shareholders" for backing out from the equity issue.

Yesterday, Emerald shares sank more than 23% in the regular session after the company announced that it would issue its planned equity offering, but at a reduced size. 

Following the negative investor reaction, Emerald's management scrapped its plans to issue equity.

About 5.87 million shares of Emerald have exchanged hands as of 11:43 a.m. ET today, compared to its average trading volume of about 364,558 shares a day.

Denver, Colo.-based Emerald is an independent exploration and production company that focuses on developing oil wells in the Williston Basin of North Dakota and Montana primarily targeting the Bakken and three forks shale oil formations.

The company operates about 64,000 net acres, or 75% of its total net acreage.

Separately, TheStreet Ratings team rates EMERALD OIL INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate EMERALD OIL INC (EOX) 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 deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and generally high debt management risk."

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 5815.3% when compared to the same quarter one year ago, falling from -$1.65 million to -$97.66 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, EMERALD OIL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Even though the current debt-to-equity ratio is 1.02, it is still below the industry average, suggesting that this level of debt is acceptable within the Oil, Gas & Consumable Fuels industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.42 is very low and demonstrates very weak liquidity.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 94.85%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 5100.00% 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.
  • Despite the weak revenue results, EOX has outperformed against the industry average of 38.5%. Since the same quarter one year prior, revenues fell by 19.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: EOX Ratings Report

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