Many penny stock investors are asking what’s the story with Camber Energy after the stock jumped 53% on Tuesday. Many are speculating that its planned merger with Viking Energy Group is finally going to happen.
In this article, we take a look at Camber Energy and the risk/reward opportunity. Remember, this was a stock that was trading over $8 at this time last year. However, the collapse in energy prices and the COVID-19 pandemic have wreaked havoc on its business plans, including the planned merger with Viking.
First up, here’s a little background info for those not familiar with the stock. Based in Houston, Texas, Camber Energy (NYSE American: CEI) is a growth-oriented, independent oil and gas company engaged in the development of crude oil, natural gas, and natural gas liquids in Texas and Louisiana. The company was formerly known as Lucas Energy.
Viking Energy Group
Viking is an independent exploration and production company focused on the acquisition and development of oil and natural gas properties in the Gulf Coast and Mid-Continent region. The company owns oil and gas leases in Texas, Louisiana, Mississippi, and Kansas.
Viking targets undervalued assets with realistic appreciation potential. Through one of its subsidiaries, Ichor Energy, LLC, Viking owns a working interest in approximately 58 conventional, producing oil and gas wells in Texas and Louisiana and an interest in more than 30 Salt Water Disposal Wells.
The wells are operated by Viking’s subsidiary, Petrodome Operating, LLC, a licensed operator in Texas, Louisiana, and Mississippi, and produce hydrocarbons from known reservoirs/sands in the on-shore Gulf Coast region, including the Hackberry, Yegua, Wilcox, Amphistegina, and Robira.
If the New Acquisition closes successfully, Viking’s subsidiary, Elysium Energy, LLC, will acquire, directly or indirectly through its own wholly-owned subsidiaries, working interests and overriding royalty interests in oil and gas properties in Texas (approximately 71 wells in 11 counties) and Louisiana (approximately 52 wells in 6 parishes), along with associated wells and equipment.
Camber Energy and Viking agreed to merge on February 3rd and then the COVID-19 pandemic swept across the nation. Oil prices collapsed and lockdowns drove the US economy to halt.
If the closing of the merger occurs (the “Closing”), the Viking equity holders prior to the merger will own approximately 80% of Camber’s fully-diluted common stock immediately after the merger, and the Camber equity holders prior to the merger shall own approximately 20% of Camber’s fully-diluted common stock immediately after the merger. Louis G. Schott, Interim CEO of Camber, stated:
“Camber is extremely excited about the planned Merger. Viking’s 2019 results, as well as its recent hedging activities, have already proved more favorable than expected. Between Viking’s operational performance, the combined security of the hedging program, and Camber’s potential liquidity, we believe the merged company will be positioned for growth following the Merger.”
Viking Posting Strong Results
On September 10th, Viking posted strong Q2 results. Here are the highlights:
- Revenues were $9.55 million as compared to $8.73 million in Q-2 2019.
- Net Loss was ($17.67 million), as compared to net income of $1.29 million in Q-2 2019, the majority of which is attributable to a change in the fair value of the Company’s derivates (i.e. hedging contracts) during the quarter.
- Income from operations was $1.00 million as compared to $2.31 million in Q-2, 2019.
- Adjusted EBITDA was $3.31 million for the three-month period ended June 30, 2020, as compared to $4.62 million for the three-month period ended June 30, 2019.
- Adjusted EBITDA for the six-month period ending June 30, 2020, was $10.05 million, as compared to $10.34 million for the six-month period ending June 30, 2019.
- Current Assets were $9.21 million, as compared to $7.84 million in Q-1 2019.
Debt Reduction and Conversion
Viking shareholders are on board with the merger. In August, Viking reduced its overall debt by approximately $7,808,661. Approximately $1,705,982 of such reduction was on account of scheduled principal payments made on or about June 30th and July 31st by Viking’s subsidiaries under senior secured credit facilities, using cash on hand in the applicable subsidiary.
Approximately $6,102,679 of the reduction was achieved, through a series of separate transactions, via the conversion of all or a portion of amounts owing by the Company to certain stakeholders into common stock in the capital of Viking. Viking issued 53,219,677 common shares in connection with the debt conversions.
Waiting On The SEC
On September 4, 2020, Camber filed with the SEC, an amended Registration Statement on Form S-4, including a preliminary joint proxy statement relating to the planned merger, which addressed SEC comments that Camber had received on the original Form S-4 which was filed on June 4, 2020.
The companies are now awaiting further comments on Form S-4 from the SEC, which the parties anticipate being minor if any are received at all, and/or approval of the SEC to move forward with finalizing the Form S-4. Once Camber has cleared comments from the SEC on the Form S-4, the parties plan to promptly move forward with setting the record dates for their special meetings to seek stockholder approvals for the merger and other items set forth in the joint proxy statement/prospectus included in the Form S-4.
To date, Camber and Viking have each satisfied nearly all of their respective conditions to closing the merger, provided that such merger remains subject to certain remaining conditions to closing, including, the effectiveness of the Form S-4, approval of the stockholders of each of Camber of Viking of the merger and certain of the other proposals set forth in the Joint Proxy, and approval of the NYSE American for the continued listing of Camber’s common stock following the merger, which the parties anticipate requiring the combined company to re-meet the initial listing standards of the NYSE American.
We should be hearing from the SEC any day now that the Form S-4 cleared. Once that happens, shareholders can vote and the merger will be completed. The goal is to re-meet the initial listing standards of the NYSE American. One of the requirements is a $1 minimum share price for 30 days. With the stock perking up, we expect the $1 price to be exceeded as momentum players pile into Camber Energy. With 5% of the float short, we also expect a nice short squeeze to help make $1 and above an easy target.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NYSEMKT:CEI, OTCMKTS:VKIN, or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.
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