Investing in smallcaps have at least one thing in common: they present “high-risk, high reward” opportunities. Few argue that premise. But, at the same time, most will admit that not all small and micro-cap stocks share equally in that proposition. Some are advancing accretive strategic initiatives, others are penetrating markets with innovative products and solutions, and a small handful of them are generating meaningful revenues. So, while investment in a company that can check just one or two of those boxes could yield returns at some distant point, finding a company checking all three can often deliver value sooner than later. Camber Energy, Inc. (NYSE-Amer: CEI) meets those criteria.
Following a share consolidation and its announcement of a planned acquisition expected to add up to $55 million in gross revenues, CEI could be primed for growth faster than many think. That’s caused considerable discussion, with bears wanting CEI to provide more updates while the bulls contend that CEI has done plenty to position itself for a 2023 breakout. Most opinions are siding with the latter, especially after CEI announced hiring Shareholder Intelligence Services, LLC as part of its overall efforts to help identify and combat potential short selling of its stock and protect the interests of its shareholders. That initiative can immediately benefit the company and its shareholders.
Remember, there are plenty of defenseless smallcaps for naked short sellers to feast upon. By removing itself from that group, CEI does at least two things. First, it protects actual shareholders from competing with relentless naked sellers with an unlimited arsenal of invisible shares to depress valuations. Secondly, and notably from CEI’s perspective, is that its shares become more attractive from an acquisition standpoint, with those selling assets for shares comforted knowing that extreme volatility associated with broad-based illegal trading is mitigated.
A Sum Of Its Parts Consideration
That’s a big deal for fast-growing companies like CEI because it helps expedite a strategy of maximizing value from current and future assets. Both considerations are in play at CEI as they accelerate a growth-oriented diversified business mission. That objective is being fueled through a combination of contributors, including subsidiaries like Viking Energy (OTC: VKIN) that provide custom energy & power solutions to commercial and industrial clients in North America and value inherent to its interests in United States oil and natural gas assets.
However, CEI isn’t limited to the U.S. Markets. Through its majority-owned subsidiary reach, CEI benefits from subsidiary interests holding an exclusive license in Canada to a patented carbon-capture system, interest inherent to intellectual property rights to a fully developed, patented Waste Treatment system using Ozone Technology, and additional asset interests benefits CEI 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 provides value on several levels, each contributing to creating sustainable shareholder value.
The great news is that with stable positive cash flows already in play from conventional energy and resource opportunities and interests, CEI is well-positioned to drive its interests and subsequent valuation upward through a diverse portfolio of innovative, clean energy technologies.
Much of the near-term appreciation could come through the already-mentioned Viking Energy Group. Camber Energy, Inc. owns a majority of the issued ordinary shares of VKIN, which creates value from being a leading manufacturer and supplier of industrial engines, power generation products, services, and custom energy solutions. They also hold substantial I.P., with VKIN recently updating investors about a fully developed, patent-pending, ready-for-market proprietary Waste Treatment system using Ozone Technology. There’s more.
They’ve also shared details regarding I.P. 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 leveraging an Intellectual Property License Agreement with ESG Clean Energy, LLC regarding its patent rights and know-how related to stationary electric power generation, including methods to capture 100% of carbon dioxide and to utilize heat to produce saleable commodities (e.g., distilled water, DEF, NH3, NH4).
Acquisition-Based Value Drivers
Those accretive interests are valuable, and are expected to contribute appreciably to Camber’s growth. However, the most immediate value driver could be CEI’s recent announcements about planned acquisitions. During Q4/22, Camber Energy announced entering into an agreement to acquire certain privately-owned companies with $55 million in annual gross revenues. The deal will give CEI the 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 market conditions, the agreement can be a significant catalyst as markets recover in 2023.
Next, in January, 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 expected to be roughly 43,000,000 gallons per year. It’s a timely deal. Renewable diesel fuel, sometimes called green diesel, is a biofuel that is 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 the even better news: global renewable energy consumption is increasing annually, which is likely to continue as governments mandate and businesses and individuals voluntarily shift to less carbon-intensive energy sources. Keep in mind, though, that the deal is still open. Camber’s obligation to complete the transaction is conditional on a number of items set out in the Membership Interest Purchase Agreement, and there is no guarantee the conditions will be satisfied. With that said, meeting those conditions and closing the terms could be a transformative moment for CEI.
A Value Play Ahead Of Expected 2023 Milestones
In fact, several contributing assets are positioned to make CEI bigger faster. While plummeting oil prices may affect near-term revenue-generating opportunities, experienced investors also know when to position for the future. Oil prices won’t stay low forever and are always a headline away from a rally. In other words, taking advantage of CEI at discounted prices may not be the most aggressive short-term play. However, those looking at longer-term prospects may find their patience to be rewarded following an oil price rebound.
Moreover, management is doing the work necessary to protect shareholder value. Combatting short sellers by hiring industry professionals should mitigate downside risk beyond ordinary news-based trading. In addition, updates indicate that CEI’s diversification strategy could help the company grow despite its oil price-dependent nature. Its subsidiaries continue to capitalize on and are positioned to maximize their own opportunities, which would kick value up to CEI. The bottom line: with a low float, several potential catalysts in the queue, and positioned for exponential revenue increases after closing planned acquisitions, CEI is a smallcap consideration with big-time potential.
Monetizing all its potential will take time to happen. Still, as the subsidiary parts of CEI continue to contribute to a shared ambition of creating sustainable shareholder value, milestones reached along the way could be worth plenty. In that sense, CEI’s asset-fueled portfolio, supported by company reports on expected revenue-generating progress, should be attractive to those who like to trade ahead of updates and those with the patience to sit through market corrections. To either, CEI is worthy of consideration.
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