Warren Resources, Inc. (WRES) is an independent energy company focused on exploring and developing domestic oil and natural gas reserves, primarily in Wyoming, California and New Mexico. The company's management team has 29 years of experience on average in the oil and gas industry, and its technical professionals have 26 years of experience on average in oil and gas operations.
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Oil prices have fallen 70% since hitting a record $147.27 a barrel last summer, which means in just five months, crude has given up all the price gains it made in the past four years. Recently, many investors have fled from anything related to this commodity, but in the long run, dwindling supplies, resurgent demand, and a lack of investment will potentially cause crude oil to double, triple, or even quintuple in price over the next decade. The added inflationary pressures by the U.S. government are sure to exacerbate the situation.
Although buying shares of an ETF such as USO that tracks the spot price of crude oil is one great way to take advantage of these oversold oil prices, buying shares in oil companies that are drastically undervalued will most likely offer a much greater return. Warren Resources is one of these heavily discounted companies and currently trades at less than half its book value.
Currently trading at a P/E of 2.55 and PEG of merely 0.05, the company has $552.6 million in assets and $156.9 million in liabilities. Two analysts believe the stock is a "Strong Buy," three believe it's a "Buy," and four believe it's a "Hold." The average of their price targets is $10.40 (the stock closed at $2.04 on Friday).
In November, insiders bought more than a million dollars worth of stock, giving investors strong confirmation that this is an excellent time to take a position. Because of the steep decline in oil prices, the company has reduced its capital expenditure by approximately $18 million and is in the process of reducing G&A costs. With $34.53 million in cash, the company is well positioned financially and capable of acquiring other properties from peers forced to sell their stakes at bargain prices.
$1.96 (01/23/09)
