More than half of a dozen exploration and production (E&P) companies have been warned to get their stock prices above $1 or face de-listing on the New York Stock Exchange, and more remain at risk.
The de-listing warning simply means the company’s stock has fallen to less than $1, and it has six months to increase the price.
“It’s time to get back in compliance. It doesn’t mean ‘off with your head tomorrow’,” Andrew Coleman, an energy analyst at Raymond James in Houston, told Rigzone. “It shouldn’t be a surprise. A stock isn’t going to be worth 20 bucks one day and 50 cents the next. Companies are already working on their balance sheets while the prices are coming down.”
Once the warning is delivered, the company has six months to increase its stock’s worth. Management needs to remove some leverage from its balance sheet. Coleman explained that a company has several tools, both strategic and tactical, at its disposal: reverse stock splits; monetization of hedges; debt exchange; and if none of that is enough, sell some assets.
“The main reason stocks are trading [low] is balance sheets are stretched,” Coleman said, and the best way for these stocks to climb out of a slump is for commodities prices to climb out of their own slump, which has challenged oil and gas companies for almost a year.
By mid-morning Sept. 10, crude was trading at $44.64 per barrel. And while Halcón and Wilbros had busted past the $1 mark, most of the stocks at risk of de-listing were still struggling:
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