Camber Energy: Two Catalysts In Its Crosshairs ($CEI)

Camber Energy, Inc. (NYSE-Amer: CEI) stock has been attracting considerable attention, evidenced by two 3 million share upticks above CEI’s average daily volume since March, accompanied by over 10% increases. Are there reasons for the interest? Those following CEI say absolutely, pointing to the plenty of publicly available information supporting the optimism about the company’s near and long-term potential.

Most recently, earnings were the driver. Its 10-K filed in March showed comparative revenues higher, expenses lower, and dilution kept to a minimum with only 20 million outstanding shares. While impressive stats, the better news is that CEI positioned itself to accelerate growth in 2023 by reducing derivative liability by 92% to $7.59 million, shrinking total liabilities by 56% to $51.82 million compared to 2021, and decreasing net loss by 89%. Thus, a bullish thesis suggests that CEI is positioned better than ever for growth in 2023, with revenues able to fall faster to its bottom line thanks to mitigated potential performance headwinds.

Analysts covering Camber Energy agree with that sentiment.

Analyst Report Models For Over 70% 2023 Upside

Lead analyst at Goldman Small Cap Research models for bullish performance, making a case for CEI shares to reach $2.75 this year. Several value drivers are pushing his optimistic forecast. Foremost is the value expected from CEI closing its planned merger with Viking Energy Group in Q3 this year. According to the report, the combined revenue-generating firepower provides substantial energy to steepen the stock price trajectory. Though Camber is already a well-diversified equipment and services company in the energy and industrial segments, Goldman believes the merger, once closed, could create new and lucrative opportunities. The deal would enable Camber to capitalize on expanded target market potential by adding new revenue streams from custom energy and power systems and services, clean energy technology, and oil and gas interests.

Notably, while the deal is taking more time than expected to close, accretive steps taken in 2022 and so far in 2023 do get the two closer to consummating the agreement. Remember, CEI is already a majority owner in VKIN, and both companies understand the values added. Thus, despite a delay to allow for some tweaking of its terms, which is to be expected during a brutal period for smallcap energy stocks, the deal remains on track to close within the next two quarters. Once it does, CEI will be better positioned than ever to capitalize on and maximize the revenue potential inherent to a fortified pipeline business. Other acquisitions, including Camber’s intent to acquire a $55 million revenue-generating asset, are expected to strengthen that potential.

Until then, plenty supports higher valuations using inputs from CEI and VKIN. Goldman’s full-year proforma revenue forecasts for the combined company call for revenues to score $31 million in 2023, surging to $42.4 million in 2024. Notably, estimates do not include expected revenue contributions from any deal or acquisition prospect not yet in the pipeline. That’s excellent news for those considering CEI now, noting that those revenue projections support Goldman’s modeling for share prices to reach $2.75 over the next 6-9 months, resulting from a finalized merger and 4X 2024 E revenue. That multiple is based upon a review of peers in the ESG, energy, and specialty industrial equipment sectors.

Supporting The Bullish Proposition

The supporting evidence for why CEI can hit the high end of estimates is in its asset quality. Front and center is Viking Energy (OTC: VKIN), a fast-growing company providing custom energy & power solutions to commercial and industrial clients in North America. They are revenue-generating, hold significant IP, and continue to accrue interests likely to appreciate through active interests in United States oil and natural gas assets. And like CEI’s other interests, VKIN adds value by being in the right sectors at the right time.

Despite natural energy market price fluctuations, including seasonal ones, the energy sector and all its sub-segments will never go away. In fact, technology enhancements only broaden opportunities, especially those fueling the laws of supply and demand. And while headlines continually debate the “R” word, the ultimate outcome of any recession is GDP growth, which, in turn, generally causes rally fever in the energy stocks. That will happen at some point. Moreover, the US is just one of several markets for CEI and its subsidiaries. With growth expectations expected to accelerate globally in 2H/2023, being positioned early to capitalize is an asset in itself.

Through its majority-owned subsidiary reach, Camber will enjoy inherently through VKIN’s holding an exclusive license in Canada to a patented carbon-capture system, interest inherent to intellectual property rights to a fully developed and patented Waste Treatment system using Ozone Technology. In addition to that, they can also accrue value through intellectual property rights to fully developed, patent-pending, ready-for-market proprietary Electric Transmission and Distribution Open Conductor Detection Systems. In other words, CEI assets are more than growing; they are accretive to near and long-term value.

Stable positive cash flows from conventional energy and resource opportunities and interests help that proposition by positioning CEI to maximize its financial interests and provide tangible support for higher valuations through a diverse and innovative clean energy technologies portfolio.

Tangible Assets And Planned Acquisition Support Higher Valuations

More continues to accrue. Viking shared details regarding IP rights to fully developed, patent-pending, ready-for-market proprietary Electrical Transmission and Distribution Open Conductor Detection Systems, interests in conventional oil assets in the Mid-Continent Region (USA), and maximizing an Intellectual Property License Agreement with ESG Clean Energy, LLC. That deal leverages value inherent to its patent rights and stationary electric power generation know-how. It includes methods to capture 100% of carbon dioxide and utilize heat to produce saleable commodities (e.g., distilled water, DEF, NH3, NH4).

Valuing the CEI asset portfolio isn’t difficult. They provide plenty of transparency, allowing investors to appraise appropriate share price levels. Moreover, after hiring an outside firm to expose potential illegal short selling in its stock, CEI is taking steps to ensure that the value earned is kept. That’s timely to the actions taken to resolve legacy issues to facilitate expedited accretive asset additions to its portfolio. CEI has detailed its plans for doing so.

During Q4/22, Camber Energy announced entering into an agreement to acquire certain privately-owned companies generating $55 million in annual gross revenues. The recent commentary indicates steps are being taken to close that deal, including measures to protect shareholder value. Once that deal closes, it gives CEI working interests in 169 proved producing oil wells (producing 2000 barrels of oil per day), 174 proved non-producing wells, and 12 proved underdeveloped well locations. Of course, these interests are oil-price dependent, which in recessionary times can be weak. Still, despite current oil and natural gas market conditions, the agreement can be a significant growth catalyst as markets recover, whether later this year or in 2024. In either case, CEI can be in a good place, knowing that proving assets under the ground can still be enormous contributors to the balance sheet. There’s more to factor in.

Capitalizing On Diesel Market Opportunities

In Q1, CEI announced entering a Membership Interest Purchase Agreement to acquire a 100% interest in companies bringing a processing plant designed to produce renewable diesel into commercial operations. Once operational, the plant’s estimated production capacity is roughly 43,000,000 gallons annually. It will be a timely deal.

Renewable diesel fuel, sometimes called green diesel, is a biofuel chemically the same as petroleum diesel fuel and is produced through various thermochemical processes such as hydrotreating, gasification, and pyrolysis. Renewable diesel is made from renewable feedstocks instead of crude oil and is approximately 50%-55% less carbon-intensive than traditional petroleum diesel.

Here’s more to appreciate about that interest. Global renewable energy consumption is increasing annually, a trend likely to continue as government mandates and voluntary shifts to less carbon-intensive energy sources by businesses and individuals accelerate that initiative. Keep in mind that the deal is still in the works. Camber’s obligation to complete the transaction is conditional on several items in the Membership Interest Purchase Agreement. There is no guarantee that the conditions will be satisfied. With that said, meeting those conditions and closing the deal could add to what’s already expected to be a transformative growth period for CEI in 2023.

Considering what’s in play this year, share price strength on high volume shouldn’t be surprising. Investors are taking advantage of an apparent valuation disconnect that could close quickly. Remember, Camber Energy has completed the necessary groundwork to transform into a significantly larger energy company. With the execution of the details the only step remaining, the path of least resistance for Camber Energy shares is likely higher. And that can turn short-term focus into long-term gains.

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