Noble Financial Cuts Warren Resources (WRES) to Hold Following Recent Weakness

Noble Financial downgrades Warren Resources (Nasdaq: WRES) from Buy to Hold amid recent weakness in the stock.

Analyst Michael Heim noted the following with today's call:

• West Texas Intermediate oil prices continue to fall and have now reached a level in the mid $30's per barrel. Oil prices were near $90 fifteen months ago and $60 as recently as nine months ago. At the same time, Henry Hub natural gas prices have fallen to a level of $1.83 per thousand cubic feet (mcf) versus a level of $3.00 this summer and almost $4.00 a year ago. In the September quarter, natural gas was 83% of WRES production and oil was 17% of production.
• Our previous recommendation was premised on the belief that stable California oil production, favorable hedges and reasonable liquidity would provide a cushion until Appalachia gas prices improved
• The decline in oil and natural gas prices has been sharper and more prolonged than we had anticipated and is likely to raise liquidity issues before pricing improves
• We continue to believe there is value in the underlying assets held by WRES but that in today's depressed and panicked energy market, realizing that value will be difficult. The company has reported favorable drilling and production results in recent quarters. We believe these results could be expanded in a more favorable energy price environment. Our rating downgrade is also tempered by the fact that the common stock of WRES has fallen sharply, along with its competitors, as energy prices have fallen. We continue to believe the stock is trading well below its net asset value, but now believe that liquidity issues or a forced asset sale will prevent the company from realizing its full asset value.

For an analyst ratings summary and ratings history on Warren Resources click here. For more ratings news on Warren Resources click here.

You May Also Be Interested In

• HSBC Downgrades Stellantis NV (STLA:IM) (STLA) to Reduce
• National Bank Financial Upgrades Wesdome Gold Mines Ltd. (WDO:CN) (WDOFF) to Outperform
• RBC Capital Upgrades GEA Group AG (G1A:GR) (GEAGY) to Outperform