(ARD) Arena Resources, Inc – ROE Twice Industry Average

September 9th, 2009

Arena Resources Inc (ARD) continues to top expectations and the Zacks Consensus Estimate is on the rise.

Company Description

Arena Resources acquires, explores, develops, and produces oil and natural gas in the south-central states of the U.S. The company’s current reserve is estimated to be nearly 66 million barrels of oil equivalents.

Hit By Energy Prices

Arena released second-quarter results on Aug 7 that included revenues of nearly $28 million, down sharply from last year. While production was down just 2%, net income was well below last year’s levels of $24.8 million, 67 cents. Earnings for this quarter came in at $14.4 million, or 20 cents per share, for the company’s sixth consecutive earnings surprise as the consensuses was 19 cents.

This is not quite a shock considering the average price per barrel received was just over $55, relative to last year’s more than $119.

But Still Strong

Following the report, 7 of 9 analysts polled by Zacks have raised full-year estimates. The average for next year is now $1.02, up from 76 cents. Next year’s estimates average $1.55, up from $1.09 in the same time frame.

While over all this is a decrease of more than 50% the growth here is in the earnings momentum, rather than typical year-over-year growth rates. Earnings are expected to grow more than 50% in 2010, but still fall short of 2008 figures.

Industry Comparison

Arena is currently carrying no debt, while the average debt to equity ratio for the industry is nearly 35 times. The company also has a 41% profit margin while its peers are typically that much in the red. Arena’s ROE is a solid 10.7% compared to the industry norm of 5.5%.

The Chart

Share continue to consolidate as energy prices remain relatively stable. We could see a strong upward movement after the pattern continues further. Take a look at the chart below.

Zacks Investment Research
View original at: Zacks.com News Feed

More on this topic (What's this?)
“Dinner for One” – Sarkozy and Merkel (Investment Postcards from Cape Town, 1/1/12)
Arena Resources to be acquired. Small cash component hurts the deal price(ARD, SD) (AlphaNinja, 4/5/10)
CMBS balloon risk looming (Sober Look, 8/3/09)
SandRidge Energy Acquires Arena Resources (Blogging Stocks, 4/5/10)
Read more on Arena Resources at Wikinvest

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