Triangle Petroleum Corporation (NYSEMKT: TPLM)
Triangle Petroleum Corporation is having an incredible day in the market today, as the stock looks to find support before giving up all of its recent gains. Today, we’ll take a look at the history of the stock, why we saw gains recently, the risks associated with this play, and what I’m expecting to see from TPLM moving forward. So, let’s get right to it…
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Looking Back At TPLM
For some time, Triangle Petroleum was a relatively good investment. While the stock has had an bumpy ride since its IPO, overall the stock saw gains. That is until late 2014. Unfortunately, when the bottom fell out of the oil market, it also fell out of the stock. Since then, TPLM has fallen from around $12 per share to under $0.30 per share. At the end of the day, the oil supply glut has weighed heavy on the company’s ability to generate a profit. As a result, the stock is tanking in a big way.
Why We Saw Recent Gains
While most news surrounding TPLM has been negative for some time, investors finally got a bit of good news just last week. The good news is that the company is selling RockPile Energy Services. This is the company’s hydraulic fracking unit and, thanks to the supply glut, one of the biggest losing assets.
At this stage in the game, details with regard to how much money Triangle Petroleum will bring in as a result of the deal haven’t been released. However, we do know that, moving forward, the company will no longer have to carry the weight associated with the subsidiary, and given the current financial state of the company, any payment will help. With regard to the news, Curt Dacar, CEO at RockPile Energy, had the following to offer:
“This is an exciting day for everyone at RockPile. When we started the process of identifying a new capital partner, I could not have imagined a better outcome than teaming up with White Deer Energy….”
This news, while lacking specific financial data, was the news that excited investors and sent the value of TPLM upward recently.
The Company Isn’t Out Of The Woods Just Yet
While I would love to say that we’ve reached the end of the struggles and its all uphill from here, that’s simply not the case. At the end of the day, there are two big reasons that I’m concerned about the company’s ability to survive the onslaught of losses to get to the other side:
- Oil Market Conditions – Unfortunately, the oil market isn’t a good one at the moment, and it seems to be getting worse. In a strikingly familiar turn of events, OPEC recently released a report showing that production of oil was increasing among non-OPEC countries. We know that OPEC is continuing to increase production as well. This adds to the supply glut while demand shrinks. In fact, according to IEA, the demand for oil in the third quarter is expected to come in at 800,000 barrels per day. That represents a decline of about 1.5 million barrels per day year-over-year. With supplies rising and demand falling, the pressure on the oil market isn’t likely to be relieved any time soon. This is horrible news for Triangle Petroleum.
- The Company’s Financial State – On the finance side of the coin, things are going from bad to worse for TPLM. For the last 3 quarters, the company has been operating at a consistent loss. And then there’s the debt. While I had a comment calling me out for saying the company had about a billion in debt in my last article on TPLM, the balance sheet has been double checked, and it’s true. So here we have a company that’s not earning a penny, is consistently producing losses, and is drowning in debt. That’s pretty scary, my friends.
The sad part is that even the insiders seem to be loosing faith in the company. In the past 12 months, there have been very few insider buys. In fact, the number of shares insiders have purchased over the past year comes in at 173,955. The total number sold comes in at 6,045,740. At the end of the day, insiders are dropping shares like their hot.
What I’m Expecting To See Moving Forward
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While I would love to tell you that I’m expecting to see gains, that’s not at all the case. While we may have brief periods where investor excitement over TPLM leads to upward movement, everything seems to be pointing to long-run declines. Unfortunately, it seems as though Triangle Petroleum is in the perfect industry, just at the wrong time. With that said, I’m not expecting to see much by way of positivity ahead.
[Image Courtesy of Wikimedia]