Is This Good Timing For Bonanza Creek Energy Inc (BCEI) Latest Announcement?

Bonanza Creek

By Jordan Faigen

Towards the end of last week, energy stocks were trending higher. Is this good timing for Bonanza Creek Energy Inc (NYSE:BCEI) latest announcement?

Bonanza Creek Energy in the News

On May 23, Bonanza Creek Energy Inc (NYSE:BCEI), an independent energy exploration company in the United States, agreed to acquire Wattenberg field for $175.5 million. This deal includes 34,600 net acres in Weld County, doubling the company’s acreage. This deal that will likely add to Bonanza Creek’s earnings was finalized on June 1.

An Analyst Perspective

Topeka Capital analyst Gabriele Sorbara upgraded Bonanza Creek Energy Inc (NYSE:BCEI) from HOLD to BUY, with a $68.00 price target after hearing of the latest acquisition. Sorbara noted, “we see more than 28% upside following the Wattenberg bolt-on acquisition, which boosts the Company’s inventory to a point where we believe shares should garner a valuation in-line with peers, at a minimum.” Sorbara argued that this purchase of land holds great potential for the company. Sorbara has a +2.4% average return on the stock.

Gabriele Sorbara’s Past Recommendations

This is not the first time Sorbara has recommended an oil and gas company. In fact, Sorbara has earned the number seven spot out of 3,100 analysts, with a +34.2% average return per recommendation and an 88% success rate of recommendations by recommending these kinds of energy stocks.

Sorbara recently reiterated his BUY Magnum Hunter Resources Corp (NYSE:MHR) rating on May 14, following good news. The oil and gas exploration company released positive data that pleased Sorbara. He noted, “Early this morning, MHR issued an 8-K filing with an update on the Stewart Winland pad (100% WI) in Tyler County, West Virginia. The Company indicated positive data from the vertical pilot hole on the first Utica well, the Stewart Winland #1300.” Because of this news, Sorbara argued, “We believe this morning’s filing may relieve some investors’ concerns that the rock in the area is potentially overcooked. The well is expected to be drilled with a ~5,500 ft lateral and ~22 frac stages. The pad, which also includes three Marcellus wells, is expected to have initial production test data in August. We continue to believe nothing is priced in for MHR’s dry gas upside and are now even more positive that the Utica is prospective all the way down to Tyler County, West Virginia,” Sorbara has recommended Magnum Hunter four additional times, helping him earn a +16.2% average return on the stock.

Sorbara has earned one of his highest average returns recommending independent oil and gas company, Pioneer Natural Resources (NYSE:PXD). In March of 2013, Sorbara initiated coverage of Pioneer Natural with a BUY rating and $158.00 price target. He called Pioneer Natural Topeka Capital’s a “top-pick bucket (both on the value and growth front) given its scale in tow of the most coveted domestic resource plays – the Wolfcamp shale in the Midland Basin and Eagle Ford shale in Texas.” He also pointed out that, “With more than 40,000 locations and 8.0 billion barrels of oil equivalent (boe) of upside potential (versus 2012 year-end proved reserves of 1.09 billion boe), largely from the Midland Basin, we view Pioneer as a powerhouse in Texas. Pioneer has been able to execute with improving well results out of emerging horizontal targets in the Midland Basin and improving capital efficiencies (complemented by the vertical integration model)—a trend we expect to continue.” The stock rose from $126.20, to $184.92 by the time of his next recommendation in September of that year. Based on his five Pioneer Natural recommendations, Sorbara has earned a +31.1% average return on the stock.

However, even with an 88% success rate, Sorbara still has a few recommendations that have not resulted in a positive return. Sorbara also has a history recommending Rosetta Resources Inc. (NASDAQ:ROSE), an independent exploration and production company of onshore resources in the United States. In March of 2013, Sorbara recommended BUY Rosetta with a $64.00 price target noting that “ROSE is our top pick, given its premier position in the Eagle Ford shale play and its new foothold in the Wolfbone play.” Since this recommendation, the stock has risen and fallen, leaving Sorbara with a -0.2% average return on the stock.

With new land ripe full of potential, it appears that Sorbara believes many of these energy companies are set up for successful opportunities.

Jordan Faigen covers financial markets and the latest stock market news. She can be reached at [email protected]

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