California Resources Corp (NYSE:CRC) Is Best Bet On Oil Rebound

Source: rockiesventureclub.org

The focus for many investors is figuring out how to play oil prices. The oil crash has left many names decimated and some companies are now on the verge of bankruptcy. Making the wrong call will leave investors with big losses. Likewise, if investors stick to big names only like Exxon or Chevron, the returns will be good, but not astronomical. Where we think investors should look is among the oil plays trading as penny stocks and the best bet here is California Resources Corp (NYSE:CRC).

California Resources Corp is the largest oil and natural gas exploration and production company in California on a gross-operated basis. The Company operates its world class resource base exclusively within the State of California, applying integrated infrastructure to gather, process and market its production. Using advanced technology, California Resources Corp focuses on safely and responsibly supplying affordable energy for California by Californians. Like other energy names, it's price chart has followed the path of oil.

We believe the low on oil is in. At 9.038 million barrels per day, U.S. oil production is nearly 400M bpd lower year-over-year. Versus peak production of 9.6M bpd in May 2015, production has plunged almost 600K bpd. Merrill Lynch believes the pace is picking up and that we'll see production continuing to drop by 100K bpd per month as the drilling rig count continues to drop. Furthermore, on a global basis OPEC will meet on April 17th and we do expect production to be capped by the energy cartel.

We think CRC is one of the best ways to play this rebound. CRC's most recent earnings report beat expectations. The company reported a fourth quarter loss of $.20, which beat expectations by four cents. CRC reported revenues of $566 million, a beat of $7.67 million. This was quite amazing as we experienced worst oil market since the 1970s and the company managed to do better than Mr. Market was expecting. Some highlights of the report included annual crude oil production grew five percent to 104,000 barrels per day; annual total production increased one percent to 160,000 BOE per day; fourth quarter 2015 Adjusted EBITDAX was $226 million; proved reserves of 644MMBOE; replaced 140% of reserves, excluding price adjustments; approximately 30% of 2016 crude oil production hedged in excess of $50 per barrel; and finally, CRC will make just $50 million in capital investments this year compared to $401 million last year.

CRC was also able to amend its credit facilities to make it through 2016. This was a major overhang on the stock and one which we felt was greatly overblown. We said that “most of the company’s debt is not due until 2020 or later. This bides the company time and allows for a recovery in oil prices to happen, which we think will occur within the next year or two.” CEO Todd Stevens reassured the market when he said:

“We recently executed an amendment to our credit facilities which we believe will provide sufficient liquidity and covenant relief at current price levels throughout 2016. As we work to live within our means again in 2016, the main focus of our teams will be to protect our base production and build inventory to take advantage of any sustained price increases.”

Currently trading with a market cap of $400 million, CRC has been a big winner for us at Insider Financial and our subscribers. We said last time:

We still view CRC as a great long-term opportunity. However, at this point and with the recent run it’s had, we recommend booking some profits at these levels. Look to buy back in on any pullback towards $1. When oil gets back to $50, our price target for CRC is $5.

Now that shares have come back down towards $1, we feel investors should load up and look for a sustained recovery in the oil patch. We will be updating Insider Financial as soon as we know more. For continuing coverage on CRC, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in CRC and have not been compensated for this article.