NEW YORK (TheStreet) -- Shares of Vaalco Energy were falling 20.5% to $2.49 on heavy trading volume Tuesday after the offshore driller announced its first exploration well on Block 5 offshore Angola was found to be water-bearing. Vaalco Energy said it will plug and abandon the water-bearing post-salt Kindele-1 well. The company drilled the well to a total vertical depth of about 1,829 meters. Vaalco energy previously planned to drill to 2,250 meters for geological and geophysical correlation, but will no longer follow through with those plans. The offshore driller said it completed the seismic processing of more than 2,025 square kilometers of 3D data in the outboard portion of Block 5. The company said it identified several new pre-salt and post-salt leads for future exploration targets. About 1.7 million shares of Vaalco Energy were traded by 11:09 a.m. Tuesday, above the average trading volume of about 1.2 million shares a day. TheStreet Ratings team rates VAALCO ENERGY INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation: "We rate VAALCO ENERGY INC (EGY) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share." Highlights from the analysis by TheStreet Ratings Team goes as follows: The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 472.8% when compared to the same quarter one year ago, falling from $26.38 million to -$98.33 million. Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, VAALCO ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500. Net operating cash flow has significantly decreased to -$31.36 million or 181.26% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower. Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 57.91%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 477.77% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now. VAALCO ENERGY INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, VAALCO ENERGY INC swung to a loss, reporting -$1.34 versus $0.73 in the prior year. This year, the market expects an improvement in earnings ($0.01 versus -$1.34). You can view the full analysis from the report here: EGY Ratings Report Must Read: Warren Buffett's Top 25 Stocks for 2015
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