Camber Energy, Inc. (NYSE-Amer: CEI) stock finished last week consolidating around the $1.30 level. On Friday, it ended the day higher by about 4% to $1.32, again trading within a tight range that saw a high of $1.33 and a low of $1.26. Technically, CEI stock's churn, especially with continued bounces off its daily lows, positions shares to continue their bullish momentum established by an intraday surge to $1.52 on 3x its average volume last week. Starting the new trading week 8% higher to $1.41 at the close on Monday, CEI shares could be on track to re-claiming that level, with plenty supporting the bullish speculation.
In addition to CEI making progress toward finalizing a transformative acquisition that could add upwards of $55 million in new revenues, nearing its goal of 100% ownership of Viking Energy, and hiring Shareholder Intelligence Services, LLC as part of its efforts to identify and combat potential illegal short selling of its stock, CEI has laid the groundwork to ensure something else: value earned will be value kept.
That's important. Companies like CEI that are on a mission to acquire assets and use, in part, shares as a currency must prove their stability. Most important to the smallcaps in that scenario is showing that the value provided as payment maintains its fair trade value. Of course, at some point, sellers sell to maximize the value of their sold asset. No problem with that, as it's to be expected.
However, coming to terms during a negotiation certainly involves weighing risks associated with the consideration used to close the deal. If a volatile-by-nature stock is used, it generally takes more of it to convince a counterparty to close the deal. Conversely, it can take less when trading normalcy and intrinsic value are appropriately reflected. With only about 22 million shares outstanding, CEI intends to bargain from the latter and, at current prices, may have the leverage needed to justify paying less for more.
Video Link: https://www.youtube.com/embed/YT_HmBM-Ncw
Planning To Make Viking Energy Wholly-Owned
That could be the case in finalizing its intention to make majority-owned Viking Energy, Inc. a wholly-owned asset with less dilution. Doing so could be a powerful, accretive, and intrinsic value driver. Viking Energy (OTC: VKIN) is a fast-growing company providing custom energy & power solutions to commercial and industrial clients in North America. They are revenue-generating, hold significant IP, and continue to accrue interests likely to appreciate through active interests in United States oil and natural gas assets. Of course, with commodities lower across the board, pressure on the share prices of CEI and VKIN can be expected.
However, once headlines show growth returning to global markets, prices for oil, natural gas, and other commodities will likely surge from recent lows. It's a supply/demand issue and an easy model to justify the longer-term value inherent to CEI and VKIN. The near term could see fortunes as well, as recent market turmoil related to the banking sector is leading many analysts to believe that rate CUTS are in the cards. If so, that supports an argument that GDP will trend higher, and as it does, so would the demand for the raw materials needed for production.
Notably, the US isn't the only market in play for CEI and its subsidiaries. The same growth expectations extend across the border, where aggressive rate hikes may also end. Moreover, like in the US, regulators in those countries may also need to cut rates to keep their economies growing in a managed way. Those decisions could further benefit CEI through its majority-owned subsidiary reach.
Growth in that scenario could happen quickly through its stake in VKIN, which can accrue to Camber through that company holding an exclusive license in Canada to a patented carbon-capture system, interest inherent to intellectual property rights to a fully developed and patented Waste Treatment system using Ozone Technology. In addition to that, they can also accrue value through intellectual property rights to fully developed, patent-pending, ready-for-market proprietary Electric Transmission and Distribution Open Conductor Detection Systems. In other words, CEI assets are more than growing; they are accretive to near and long-term value.
Stable positive cash flows from conventional energy and resource opportunities and interests help that proposition by positioning CEI to maximize its financial interests and provide tangible support for higher valuations through a diverse and innovative clean energy technologies portfolio.
Supporting A Higher Valuation With Tangible Assets
They are demonstrating that portfolio’s value now, with Viking sharing details regarding IP rights to fully developed, patent-pending, ready-for-market proprietary Electrical Transmission and Distribution Open Conductor Detection Systems, interests in conventional oil assets in the Mid-Continent Region (USA), and maximizing an Intellectual Property License Agreement with ESG Clean Energy, LLC. That deal values its patent rights and know-how related to stationary electric power generation, including methods to capture 100% of carbon dioxide and to utilize heat to produce saleable commodities (e.g., distilled water, DEF, NH3, NH4).
Valuing the CEI asset portfolio isn't difficult. They provide plenty of transparency, allowing investors to appraise appropriate share price levels. But until CEI hired an outside firm to expose potential illegal short selling in its stock, it's been hard to maintain fair value. With that legacy issue likely resolved, and factoring in the combined contributions from CEI's interests, executing its diversified growth strategy could make the path of least resistance for CEI shares higher – and that's only considering what CEI owns now.
A revenue-generating transformation is in play that could forever change the trajectory of CEI. During Q4/22, Camber Energy announced entering into an agreement to acquire certain privately-owned companies generating $55 million in annual gross revenues. The recent commentary indicates steps are being taken to close that deal, including initiatives taken to protect shareholder value. Once that deal closes, it gives CEI working interests in 169 proved producing oil wells (producing 2000 barrels of oil per day), 174 proved non-producing wells, and 12 proved underdeveloped well locations. Of course, these interests are oil-price dependent, which in recessionary times can be weak. Still, despite current oil and natural gas market conditions, the agreement can be a significant growth catalyst as markets recover, whether later this year or in 2024. In either case, CEI can be in a good place, knowing that proving assets under the ground can still be enormous contributors to the balance sheet. There's more to appreciate.
A Timely Renewable Diesel Products Interest
In Q1, CEI announced entering a Membership Interest Purchase Agreement to acquire a 100% interest in companies bringing a processing plant designed to produce renewable diesel into commercial operations. Once operational, the plant's estimated production capacity is roughly 43,000,000 gallons annually. It's a timely deal. Renewable diesel fuel, sometimes called green diesel, is a biofuel chemically the same as petroleum diesel fuel and is produced through various thermochemical processes such as hydrotreating, gasification, and pyrolysis. Renewable diesel is made from renewable feedstocks instead of crude oil and is approximately 50%-55% less carbon-intensive than traditional petroleum diesel.
Here's excellent news regarding that interest: global renewable energy consumption is increasing annually, a trend likely to continue as government mandates and voluntary shifts to less carbon-intensive energy sources by businesses and individuals accelerate that initiative. Keep in mind that the deal is still in the works. Camber's obligation to complete the transaction is conditional on several items in the Membership Interest Purchase Agreement, and there is no guarantee that the conditions will be satisfied. With that said, meeting those conditions and closing the deal could add to what's already expected to be a transformative growth period for CEI this year.
2023 Set Up For A Camber Energy Growth Spurt
Factoring everything into play, progress made throughout 2023 could provide an avenue for the fastest growth in CEI's history. Its majority stake in VKIN and other subsidiary interests indeed helped to set the table for that to happen, and those alone can justify a higher valuation. But, the CEI appraisal can't stop there.
Its planned acquisitions, once closed, can add exponential revenues to CEI streams that could fuel share prices to move substantially higher on intrinsics alone. Considering that inherent potential, modeling for multiples higher based on CEI's sum of its parts would certainly not be an overzealous presumption.
Thus, for those with an intermediate investment timeline, Camber Energy is a company worth researching and, frankly, putting on the shortlist for investment consideration. With milestones reached in 2022 that can become catalysts this year, that latter idea is supported by an appreciable valuation disconnect between CEI's parts and its stock price that may be too wide to ignore.
Admittedly, CEI will need time to monetize its potential. But as it happens, additional milestones reached add incremental value that can justify and support a sustainable increase in CEI's stock price. Moreover, with updates likely in the queue, the trend higher may steepen as it continues.
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