CEI - Camber Energy May Have a Clean Debt Slate but Still No Sign of Revenues
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After several meme-stock induced rallies over the last 12 months, Camber Energy (NYSEMKTS:CEI) is starting 2022 at right about the same stock price it was at this point in 2021. Has anything changed to ignite more than a speculative investment in CEI stock?
There may be. On Dec. 27, 2022 management announced the firm had entered into a loan agreement on Christmas Eve, injecting $25 million in convertible debt into the company. The maturity date on the loan is Jan. 1, 2027.
In addition to getting an attractive interest rate (Wall Street Journal prime rate), the agreement is significant for three reasons. One, it effectively wipes all the company’s other secured loans off its balance sheet. As Steve Booyens wrote for InvestorPlace in November, Camber Energy had an uncomfortable level of debt with an eye-popping 121% leverage ratio.
Two, it extends its obligation for an additional five years. That buys the company time to begin generating revenue.
And, the terms of the agreement allow the debt to be converted into equity if the CEI stock price goes above $1.50 prior to the loan’s expiration date. The share price ranged from 33 cents a piece to $4.85 over the last 52 weeks.
Separately, the company released an SEC filing on Jan. 3 that reported shareholder approval to increase the number of authorized shares from 250 million to 1 billion.
All of this means that Camber Energy appears to have a clean slate. But does that mean it’s worth a buy? That answer is less clear.
Retail Bailout Theme Continues
One of the perhaps unintended consequences of the retail investor revolution is that many companies find themselves flush with cash. And in nearly every case, this windfall is greatly needed. It’s been a listed version of “Go Fund Me” and it’s been fascinating to watch.
Of course, companies had to do something positive with the money it received. And it appears that Camber Energy is taking steps to do that. If nothing else, the added liquidity was a likely contributor to helping the company receive what CEO James Doris described as the most favorable loan the company was ever able to negotiate.
Once again, I’m not criticizing the companies for benefiting from retail investment capital. It’s just kind of interesting. Many retail investors don’t care about the fundamentals of the businesses they invest in, it’s all about their individual gain or loss. But an action like the one taken by Camber Energy shows that the management cares.
With that said, the good news for Camber Energy is that the chances of the company going bankrupt have dropped significantly. But now the company has to generate revenue.
Camber’s Carbon Capture Future
As InvestorPlace’s Louis Navellier wrote earlier this week, the bullish and bearish case for CEI stock came down to its investment in Viking Energy (OTCMKTS:VKIN). Viking has a licensing agreement with ESG Clean Energy for a carbon dioxide capture system.
Carbon capture is not “clean” energy in the traditional sense. But it is becoming viable if it can be done on a commercial scale. The only issue is that, for now, it’s not generating meaningful revenue for the company.
And even though the company does have a presence in the traditional oil and gas sector, it has not provided any sign that it is participating in the sector’s reopening, particularly since Camber’s most “recent” financial statements are from the six months ended Sept. 30, 2020. While CEI stock has lost 7.28% over the last 12 months, the largest exchange-traded fund in that sector, Energy Select Sector SPDR Fund (NYSEARCA:XLE) has gained 63.3% in value.
For that matter, I’m not sure if the company’s carbon capture system is what has investors excited. I suspect it’s more about the CEI stock price which currently is below $1 making it a true penny stock.
The Bottom Line on CEI Stock
Despite my misgivings about the mindset of some retail investors, I respect their tenacity. And that tenacity can be a reason that CEI stock will remain volatile. If Camber Energy can make their carbon capture technology a reality, retail investors will have the last laugh.
As for me, Camber Energy is not generating meaningful revenue and until that fact changes, I’m not going to bite on CEI stock, particularly when it still has extremely high short interest.
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On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.
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