Understanding Why Bonanza Creek Energy Inc (NYSE:BCEI) Shares Dropped 3%

Bonanza Creek Energy Inc (NYSE:BCEI)

Shares of Bonanza Creek Energy Inc (NYSE:BCEI) retreated more than 2.8% Tuesday, with the stock losses continuing in extended trading. The company is scheduled to release its Q4 2016 financial results on March 6.

Bonanza has reported feeble earnings in the recent quarters. Its earnings have missed expectations three times and topped estimates once in the trailing four quarters.

Revenue of $49.3 million that Bonanza reported in Q3 2016 decreased from $71.2 million in the year-ago quarter and came short of consensus estimate that called for revenue of at least $52.3 million. EPS loss of $0.35 widened from EPS loss of $0.07 and missed the consensus of EPS loss of $0.28.

It seems some investors have been trying to move to the sidelines ahead of Bonanza’s Q4 report as they are unsure what to expect from the report given the company’s earnings mixed track record.

Bankruptcy restructuring

Bonanza Creek Energy Inc (NYSE:BCEI) filed for Chapter 11 bankruptcy and it has provided a restructuring proposal on how it intends to emerge out of the bankruptcy. However, the proposal is disputed by some of the company’s shareholders who have claimed that the restructuring plan gives undue advantage to the company’s lenders, specifically bondholder.

Bonanza owes $867 million to bondholders, who will take over the ownership of the company’s largest operations. But some shareholders are unhappy with the proposal to hand over Bonanza to bondholders. The shareholders also feel that the management of Bonanza is undermining the value of the company because it would emerge from the bankruptcy as a company worth only $690 million. Yet only a few months before the company filed for bankruptcy, the management quoted its value between $1.4 and $4.2 billion, according to the disgruntled shareholders.

Those shareholders came up with a rival restructuring plan that they believed if pursued would be fair for them, the bondholders and other interested parties. But they were required to detail how their alternative restructuring plan would be funded.

It seems the dispute over Bonanza Creek Energy Inc (NYSE:BCEI)’s bankruptcy restructuring plan added to the rest stock losses as some investors headed for exit door in the stock. Bonanza was one of the energy companies that sought to raise additional capital to shore up their operations oil prices deteriorated over more than two years.

The company had ceased drilling for oil, but officials said the company could resume drilling in Q2 2017 after it emerges from bankruptcy.

Stock movement

Shares of Bonanza Creek Energy Inc (NYSE:BCEI) have risen more than 68% since the beginning of 2017, but are still down nearly 5% from where they were 12 months ago.

Ticker Symbol BCEI
Last Price a/o, 4:02PM EST  $                         1.72
Average Volume (mlns) 4.49
Market Cap (mlns)  $                   93.86
Sales (mlns) $205.10
Shares Outstanding (mlns) 54.57
Share Float (mlns) 49.17
Shortable Yes
Optionable Yes
Inside Ownership 0.30%
Short Float 19.14%
Short Interest Ratio 2.1
Quarterly Return 68.63%
YTD Return 68.63%
Year Return -7.53%

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Monica Gray has an undergraduate degree in Accounting and an MBA – earned with Honors. She has six years of experience in the financial markets and has been a securities analyst for the past two years.

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Monica has an undergraduate degree in Accounting and an MBA she earned - with Honors. She has six years of experience in the financial markets and has been an analyst for the past two years.

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