AREX - Approach Resources: Credit Facility Lenders Will Largely Determine Its Future

Approach Resources (AREX) is trapped by its high fixed costs, which result in it needing to increase production significantly to reduce the per BOE impact of those fixed costs. However, the fall in oil prices and the large WAHA differential (along with limited liquidity) has resulted in it reducing its budget below maintenance capital expenditure levels.

Going forward, if Approach wants to maintain production at 2019 levels, it may need over $70 WTI oil to avoid cash burn. Stronger WAHA prices would help a bit, but even with $2.25 realized natural gas