Resolute Energy Corp (NYSE: REN)
Resolute Energy has been riding on highs lately, and for good reason. In the most recent earnings report, we learned that production was heading up. So, increased production should help with the blues the company is feeling associated with low oil prices. Not to mention, there have been added hopes recently that OPEC and non-OPEC nations would reach an agreement to freeze production. Nonetheless, there’s a good reason to run away from this stock quickly. Today, we’ll talk about what that reason is, what we’re seeing from the stock in the market, and what we can expect to see from REN moving forward. So, let’s get right to it…
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Here’s Why REN Is Likely To Take A Big Dive… And Soon!
One of the big factors that’s causing recent gains in the value of Resolute Energy has to do with a meeting that is taking place at the moment. Right now, OPEC and non-OPEC oil producers are in the midst of conversations with regard to finding a solution to the current oil crisis. As a result, the price of oil has headed up in hopes that the world’s top producers will make a deal to freeze production. At the end of the day, REN is heavily focused on oil. So, a decrease in production that would support price growth would ultimately be a positive thing.
Unfortunately however, even though the world’s top producers are in conversations, that doesn’t mean that a deal will be made. In fact, at the moment, it’s looking more and more like this meeting will end just like the rest of them – fruitless.
At the end of the day, geopolitical arguments between Saudi Arabia and IRAN have blocked the deal at each and every discussion. Unfortunately, this is likely to be the case at this meeting. In fact, in a statement surrounding the progress of the meeting, Iranian Oil Minister Bijan Zanganeh said, “It is not the time for decision-making…. We will try to reach agreement for November.” So, it’s clear that REN isn’t going to see massive gains as the result of an agreement any time soon.
What We’re Seeing In The Market Today
Unfortunately, today is proving to be an overwhelmingly negative day for Resolute Energy. At the end of the day, investors were hoping that OPEC and non-OPEC oil producers would be able to come to some kind of agreement. Unfortunately, that doesn’t seem to be coming to fruition. As a result, we’re seeing strong declines in the value of REN today. Currently (11:44), REN is trading at $20.67 per share after a loss of $1.83 per share (8.13%) thus far today.
What We Can Expect To See Moving Forward
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Moving forward, I have a relatively bearish opinion of what we can expect to see from Resolute Energy. At the end of the day, the problem I have with the stock has little to do with the company and more to do with the industry. While REN isn’t making business mistakes, the company is heavily dependent on oil. Their exposure to the spot market price of the commodity and recent news surrounding the slim chance of an agreement between OPEC and non-OPEC producers suggests that we’re going to see further declines. The bottom line here is that, until something happens that gives oil a boost, REN is destined to declines as the company continues to operate at a loss.
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