Resolute Energy Corp (NYSE: REN)
Resolute Energy has been on an incredible run this month, reaching an intraday high of $20.22 per share earlier this week. However, more recently, we’ve started to see downward movement. In my opinion, the downward trends we’re seeing are just the tip of the iceberg. At the end of the day, there’s a storm coming, and it’s time to abandon this ship. Today, we’ll talk about why we’ve seen such incredible gains on the stock throughout the month, what we’re seeing in the market today, and why REN is likely to see big declines ahead!
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Why REN Has Been Gaining In The Market
At the end of the day, there are two primary drivers to the bullish activity surrounding Resolute Energy as of late. Those factors include:
- Continued Drilling & Increased Production – On August 8th, REN released its report for the second quarter. While earnings left much to be desired, investors cheered production news. In the report, the company announced that the board had approved continued drilling in 2016. The report also showed that production improved from 9,016 barrels in the first quarter to 11,865 barrels in the second quarter.
- Potential Oil Production Freeze – Another big story that helped in the bullish run we’ve seen from REN recently came on August 15th. On this day, investors cheered Saudi Arabia’s apparent willingness to work with other oil producers in an attempt to freeze production at current levels. This helped to send oil on a rally, pushing Resolute Energy up with the commodity.
What We’re Seeing In The Market Today
While the stories above helped to push REN upward in the market throughout most of the month, we’ve been seeing declines recently. Those declines are continuing today in a big way. Currently (2:11), the stock is trading at $16.21 per share after a loss of $1.66 per share (9.29%) thus far today.
These Declines Are Nothing Compared To What’s Coming
Sure, REN is down in a big way today, but the declines we’re currently seeing are likely just the beginning. In fact, I’m expecting to watch as this thing tanks. The reason is relatively simple. First and foremost, investors cheered increased Q2 production. However, that production actually proved to be a dramatic decline if you look at it on a year-over-year basis, and an even larger decline compared to the same quarter 2 years ago! So, quarter-over-quarter, production may be up, but it’s still nothing to be happy about. Not to mention the loss of $2.44 per share produced through the quarter shows that there’s plenty to be desired here.
The other factor helping to push Resolute Energy stock upward is fading as well. While Saudi Arabia mentioned that it would be willing to work to freeze oil production levels on the 15th, we haven’t heard anything about it since. So, hopes of a production freeze are starting to fade, leading to declines in oil yet again.
At the end of the day, REN is a horrible investment. Given both the state of the oil market and the current state of the company, it seems like there’s only one direction this stock can go. That direction is downward! So, if you’re still in on this one, you may want to strongly consider finding your exit point.
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What Do You Think?
Where do you think REN is headed moving forward? Join the discussion at TalkTRENDZ!
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