This week’s Stock of the Week is benefiting from persistently low oil prices by consolidating already strong holdings.
Energy in Focus
SRC Energy Inc. (SRCI), known as Synergy Resources until March of this year, is a highly focused company that has used the downturn in oil prices to improve its holdings in the geographic area where it operates—the Denver-Julesburg basin in Colorado.
SRC raised $500 million and increased its holdings for exploration and development by adding 33,100 acres from Noble Energy. SRC now has about 350,000 acres under lease and operates 285 producing wells. SRC has identified more than 800 locations suitable for drilling in the newly added land, which creates a multiyear well-drilling inventory.
SRC spent most of last year integrating and consolidating new holdings. Starting in the fourth quarter of 2016, it drilled 22 new wells that have now started producing. It plans 80 more wells this year, with the aim of doubling production during 2017.
Management has valuable prior experience at Anadarko Petroleum and Kodiak Oil. Unless the oil sector unexpectedly suffers another deep decline, SRC’s expansion should strongly benefit shareholders. Revenue of $112 million last year should grow to $267 million this year and $431 million in 2018.
Fiscal year: Dec. Earnings per share: 2018 est./$0.52…2017 est./$0.29…2016/$0.03.
This Week’s Expert
Daniel S. Perkins is executive vice president of Perkins Capital Management, Wayzata, Minnesota, which manages $127 million, and co-portfolio manager of the $6.5 million Perkins Discovery Fund (PDFDX). PerkinsCapital.com