In everyone’s life, a little rain must fall. And when your existence plays out on the oil fields of Central Oklahoma or the hotter than hell Permian Basin, rain can sometimes be a rare and welcome event. But in the metaphorical sense, small independents have experienced a deluge of Biblical proportions over the last couple of years, so much so they haven’t scrapped the plans for the ark just yet.
Temperatures in West Texas’ Permian can reach well into the 100-degree range in the summer time, but it’s red hot this winter because discoveries like Wolfcamp have converged with newly discovered formations allowing producers increased access to oil and gas at a fraction of the cost. Longer wells, rather than deeper wells, mean fewer spuds, fewer rigs, fewer people – well, you get the picture. All of that means staving off bankruptcy for another day if you are a small independent producer living hand to mouth during the dark days of $30 West Texas Intermediate.
Debtwire Analytics reported last September, 135 O&G companies of various shapes and sizes were still upside-down with regard to their financials. That’s on top of 70 companies that have already succumbed to insolvency. So, when you are a company with a market cap of $24 million and a 2016 year-end loss of $25.4, what are you supposed to do?
For Houston-based Lucas Energy the answer was simple – change your name. A year after announcing a name change was in the works, Lucas Energy officially adopted the Camber Energy mark this week. Like many small independent producers, Lucas struggled through 2015 fending off low crude commodity prices by wheeling and dealing its way to liquidity. They bought up distressed assets and put duct tape on limping equipment to make ends meet. Now, they emerge as a brand new company with new assets, new help and a renewed outlook on life.
While everyone has been scrambling, looking for investors or a good lawyer, Lucas went shopping. Lucas announced the rebranding late last year when it decided to make a strategic shift by expanding from the Eagle Ford and Austin Chalk formations to what they saw as more lucrative plays in the Permian and the Hunton formation in central Oklahoma. Camber picked up 3,630 acres in the Permian last January and has already added more than 500 acres since. They also supplemented their Hunton holdings by 10,000 acres.
The first time anyone ever drilled for oil on purpose in the Permian was in 1921. Since then the industry has never looked back. The Permian continues to outpace any other production region in the country by at least double. And though it has produced billions of barrels of crude over the years, unlocking new finds like the Wolfcamp shale formation makes the entire region comparable to some Saudi Arabian fields.
If Camber can hang on it will be in a good position to reap some benefits. But watching its share price over the past year has to be gut-wrenching for CEO Anthony Schnur. Its 52-week high was around $8 per share. Since then it’s seen steady declines all the way down to a buck-ten at this writing.
So where is Camber today? Well, there’s the new name and that’s pretty cool. They want us to think of Camber as “accelerating into the curve,” whatever that means. My defensive driving instructor in high school taught us that when we approach a curve it’s wise to brake. Yes, that would be the prudent action to take – but it’s a whole lot less fun. If the so-called ‘curve’ was crude in the $30s when Lucas developed their strategy, they definitely accelerated into it. These are the guys I would like to go to Vegas with, not to bet against but to watch. They’re either going to come home flush with fortunes or it is going to be the most stupendous crash-and-burn you’ve ever seen. Either way, it’ll be memorable.