IPOOF - InPlay Oil (IPOOF)(IPO:CA) - Better-than-expected results and new credit facility may mean stock has bottomed out

Second quarter results beat our lowered expectations. The drop off in production stemming from the curtailment and shut in of wells was not as great as expected. The company was able to lower production costs per unit and SG&A costs by scaling back discretionary spending. Oil prices have rebounded quicker than expected, and the company is responding. Oil prices rebounded to $40/bbl well ahead of expectations. Management indicated it will begin drilling again in the third quarter and expects to reach pre-COVID production levels by the third quarter.New credit facility will bridge the gap until cash flow improves. InPlay entered into a $25 million credit facility raising its liquidity to $31 million. With higher oil prices, the company should approach a position near cash flow neutral. The added liquidity will provide a safety net until new production comes on line. Look for the company to add hedges at prices above $40 to derisk well costs.We are reiterating our outperform rating and $0.60 price target. With oil prices having returned to a profitable level and liquidity issues becoming less of a concern, we believe the shares of InPlay offer an attractive investment. We reiterate our outperform rating on the shares and our $0.60 price target. We are raising our revenue, cash flow and earnings estimates to reflect higher energy prices.Read More >>