Cardinal Energy Group Inc (OTCMKTS: CEGX) Making The Right Moves

We first wrote about Cardinal Energy Group Inc (OTCMKTS: CEGX) last week. You can read the article here. We claimed that something was going on with the company, since hedge funds were buying it and the company was releasing some very good news:

"Things look to be brewing judging by the recent hedge fund buying and a rebound in the price of oil. There’s also the possibility that Cardinal gets bought out due its large net operating losses and production assets. Either way, the smart money is here and retail investors should be interested in figuring out why." Source

Well, we were actually correct, as the company recently delivered a new press release that made the stock price rebound 66%. In this follow-up, we will assess what happened:SourceRecent developmentsOn April 12, 2017, the company received $4.6 million in a private placement for 4,600,000 shares of Series D Preferred Stock with a stated value of $1.00 per share. These securities will pay 5% annualized dividend and can also be converted to equity. Additionally, the holders will be able to convert an aggregate 5% ORRI (Overriding Royalty Interest) on the assets acquired with the $4.6 million received. You can find more information in the press release and in the 8-K filed on March 31, 2017.Traders did not react to this information. We do not know why. We believe that it is quite relevant and positive. The enterprise value of the company is approximately $6.3 million, and the total outstanding debt is $6.02 million. Thus, this new equity financing received provides some time for the company to negotiate with debt holders and continue its operations.Traders reacted more to the news released a few days later. On April 20, 2017, the company announced the acquisition of EOI Eagle Operating, Inc. assets using 1,000,000 new shares of the Series B Preferred stock and a note for $250,000. Timothy W. Crawford, CEO of Cardinal Energy, said the following:

We are pleased to announce the acquisition of Eagle's assets as these assets will generate significant revenues to the Company. However, the jewel of this acquisition is the many years of experience that Paul Carlisle brings to Cardinal" Source

In addition, it was noted that Paul Carlisle, president of the company acquired, will be appointed to the Board of Directors and will be the new President and Chief Operating Officer of Cardinal. We believe that this move is very relevant as this executive knows very well the operations and is crucial to have him on the board. We believe that the most interesting words of the new CEO were the following:

"Our focus will be to first re-establish production on the wells with the lowest cost of returning to full operation. The newly acquired leases from Eagle are located adjacent to proven oil fields with significant current production and have significant potential for increased levels of crude oil production." Source"Now that commodity prices have stabilized we expect to bring these leases back on line quickly. With our low development and lifting costs we plan to capitalize on this opportunity by bringing additional wells online to increase production levels and to extend the economic lives of these properties. " Source

These words are exactly what we wanted to hear. The company is looking for new oil fields that will permit the company to increase production now that commodity prices have stabilized. As our email subscribers know, we believe that the oil price will not only stabilize but may continue its uptrend, thus the increase in crude oil production is very positive. This is from our previous piece about this company:

"As noted in this article and this other article, we believe that the crude oil price will rise due to the OPEC production cuts. The market seems to agree with this rationale." Source

For the readers with a background in the oil industry, the fields acquired can be seen in this website, wherein you will find a geological map with the drilling permits and leases of EOI Eagle Operating, Inc.In addition, there were some other news that the company disclosed only using the SEC filings service. This news is valuable, thus we wanted to disclose them here for our readers and subscribers. On March 31, 2017, the company disclosed the following in a filing:

"Effective on or about February 10, 2017, 250,000,000 of the Shares were rescinded and returned to the treasury of the Company resulting in 50,000,000 of the Shares from the original issuance of 300,000,000 Shares described above remaining issued and outstanding." Source

These were shares that the company gave to the hedge fund company ‘Meyers Associates, L.P.’ and ‘Gregory R. Traina’ on January 5, 2017, and the funds returned to the company. Some savvy traders would say that the transaction was a buyback of shares, which is great for existing shareholders.Finally, on March 17, 2017, the CFO of the company, John Jordan, resigned from the company and noted that it was not the result of any disagreement with the company. In fact, the business executive will continue to serve on the Board of Directors. You can read the letter here. The market did not react to this information and we don't believe that the news is quite relevant, as he is still working with the company. These are some of the reasons that he gave:

"As you know I turned 70 years old in February and last year marked my 47th year in the oil and gas industry. It is now time that I devote my full energies to my family, including ten grandchildren and my volunteer work with our nation’s military veterans. At this time with the Company in the midst of a critical capital restructuring it is essential that Cardinal Energy Group and its key stakeholders be served by a full time Chief Financial Officer. Unfortunately, I cannot dedicate the resources necessary to be a truly effective member of the daily management team and must step down from my position as your Chief Financial Officer effective with the close of business today, March 17, 2017." Source

ConclusionCardinal Energy, as we announced in our previous piece, is in a process of reorganization and is delivering positive news to its shareholder base. In addition, we still believe that the company has a bright future as crude oil prices have stabilized and may keep rising due to OPEC production cuts. To sum up, make your own research and make sure to keep yourself informed about this stock. We will be updating our subscribers as soon as we know more. For the latest updates on CEGX, sign up below!Disclosure: We have no position in CEGX and have not been compensated for this article.