Resolute Energy (REN) Stock: Be Very Careful My Friends

Resolute Energy Corp (NYSE: REN)

Resolute energy has had an incredibly strong run as of late. Over the past month, the stock more than doubled in value. Looking back 3 months, we’re seeing gains of more than 400%. On top of that, the stock has been the subject of strong earnings and several analyst upgrades. However, are investors and analysts forgetting something BIG here? In my opinion, the answer is yes. Today, we’ll talk about why the stock is climbing, what we’re seeing in the market today, and what we can expect to see from REN ahead.

Trade smarter and make more money with Tradespoon!

Why REN Stock Is Seeing So Much Support

With Resolute Energy recently missing earnings per share in a big way, it may be hard to understand why the company is seeing such strong gains. However, investors aren’t concerned about earnings at the moment. Right now, they are paying very close attention to production growth. After all, REN is a company that is focused on the sale and production of oil.

At the moment, REN is seeing incredible growth in production. In fact, in the second quarter, the company produced about 15,000 BOE per day. This figure came well ahead of 11,000 BOE per day. On top of that, it represents growth in the amount of 70% for the quarter.

With the figures above, we can see that production has climbed dramatically. As a result, investors and analysts believe that the company is not nearly as exposed to spot oil prices. With far more oil to sell, the company should still see gains.

Investors And Analysts Are Missing The Mark

While I would love to say that I’m expecting for REN to grow dramatically from here, the truth of the matter is that the oil market is getting increasingly concerning. Sure, with increased production the company may be able to hold steady where it is, but increased production is also a major problem.

The reality is that across the industry (and around the world) we’re seeing increased production. I’m sure that we all remember what happened when the world learned that we were heading into a massive supply glut. Well, that glut isn’t gone just yet. In fact, thanks to increasing production around the world, we’re likely to find ourselves in the same position. After all, with economic conditions in the dumps at the moment, consumers aren’t driving more and are likely to continue working to reduce their reliance on oil. This, at the end of the day, is bad for oil and, ultimately, bad for Resolute Energy.

What We’re Seeing From The Stock

At the moment, REN stock is gaining. After all, investors are overwhelmingly excited about what we’ve seen from the stock as of late. Currently (3:24), the stock is trading at $14.39 per share after a gain of $0.51 per share (3.67%) thus far today.

What We Can Expect To See Moving Forward

Moving forward, I have a relatively mixed opinion of what we can expect to see from REN. In the short run, I’m expecting that excitement will continue, pushing the stock further upward. However, if you decide that you’re going to get in on the frenzy, make sure to move with caution and watch the news. At the end of the day, oil producers continue to increase production while global economic conditions don’t support the gains in demand needed to avoid a glut. As a result, we’re likely to see big declines in the long run.

Don’t waste your time! Click here to find winning trades in minutes!

What Do You Think?

Where do you think REN is headed? Join the discussion at TalkTRENDZ!

[Image Courtesy of Pixabay]

Leave a Comment