Camber Energy, Inc. (NYSE-Amer: CEI) shares are building a formidable trading base. Since the start of May, CEI shares have been trading between $1.25 – $1.35, with average volume trend lines rising to show investors are indeed nibbling at what appears to be an attractive value proposition. Interest is timely, coinciding with CEI updates indicating its path to becoming a larger company is accelerating. Most recently, the company announced an amendment to its Amended and Restated Agreement and Plan of Merger with Viking Energy (OTC Other: VKIN), dated February 15, 2021. It’s an important event. Why?
Because it makes the planned merger with VKIN a near-term proposition, with specific terms related to the complete combination of the two entities and their surviving entity more transparent and accretive, including canceling specific warrant overhangs. From an investor’s perspective, the value inherent to the combination is worthy of recent attention. Foremost is that it’s a value-enhancing event, providing CEI with 100% interest in VKIN, its revenues, and planned expansions. And the benefits are mutually beneficial.
Camber shareholders will accrue full legal and accounting control of Viking, facilitating CEI reporting underlying subsidiary revenues in their entirety, and benefit directly and entirely from Viking’s business activities, including their interests in Custom Energy & Power Solutions Business; Exclusive License to a Patented Clean Energy & Carbon-Capture system; Intellectual property rights to a fully developed, patented ready-for-market proprietary Medical & Bio-Hazard Waste Treatment system using Ozone Technology; and patent-pending, ready-for-market proprietary Open Conductor Detection systems. VKIN shareholders get a more actively traded company, a stronger balance sheet, and better access to capital to continue impressive growth trajectories.
For shareholders on both sides, the deal does another thing: it adds tremendous near and long-term value that can shift CEI growth from hyper-speed to warp. And with plans to soon file its preliminary registration statement on Form S-4 with the SEC, accelerating toward that pace is in progress.
Video Link: https://www.youtube.com/embed/YT_HmBM-Ncw
Camber Energy Fueled For 2023 Growth
Those already following CEI know that it’s a growth story in progress. Camber’s 10-K filed in March provided plenty of supporting evidence. It showed comparative revenues higher, expenses lower, and only 20 million outstanding shares. There was more good news. It showed Camber also positioned itself to maximize its bottom line growth and increase shareholder value by reducing derivative liability by 92% to $7.59 million, shrinking total liabilities by 56% to $51.82 million compared to 2021, and decreasing net loss by 89%.
More groundwork has been completed since, with CEI announcing entering into agreements canceling and terminating, effective as of the agreement date, one hundred percent of the warrants held by Discover Growth Fund, LLC and Antilles Family Office, LLC. The Termination Agreements also include a provision granting CEI the right to redeem the remaining shares of Series C Preferred Stock held by Antilles, subject to the conditions set out therein.
Those accomplishments pave the way for CEI to attack its 2023 opportunities. One of the value drivers enhanced by a strengthened CEI is the expected 100% ownership of Viking Energy (OTC: VKIN), a fast-growing company providing custom energy & power solutions to commercial and industrial clients in North America. Notably, since Camber is already a majority owner in VKIN, it contributed to revenue growth.
However, making it a wholly-owned asset does more than add to revenues; it can facilitate additional growth from Camber’s ability to leverage significant IP, benefit directly and wholly from VKIN’s mission to monetize other assets and interests, including those related to expanding its stake in the United States oil and natural gas markets. Like other assets in the CEI portfolio, VKIN’s value enables them to efficiently capitalize on specific market opportunities at the right times. Those listed at the start of this content are several. But adding to that is the intent to maximize an Intellectual Property License Agreement with ESG Clean Energy, LLC. That agreement taps into the value inherent to its patent rights and stationary electric power generation know-how. It includes methods to capture 100% of carbon dioxide and utilize heat to produce saleable commodities (e.g., distilled water, DEF, NH3, NH4).
Moreover, markets beyond those in the US will also be in play, the result of CEI exploiting the value from VKIN holding an exclusive license in Canada to a patented carbon-capture system and interest inherent to intellectual property rights to a fully developed and patented Waste Treatment system using Ozone Technology. In other words, CEI assets, and those being added, fuel a larger mission to capitalize on and maximize developing opportunities through stable positive cash flows generated from conventional energy and resource opportunities. Current interests accelerate CEI’s development; the added value will expedite that impressive pace.
Another planned acquisition can also be best described as transformative.
Goldman Small Cap Research Analyst Is Decidedly Bullish
In Q4/2022, Camber announced entering into an agreement to acquire certain privately-owned companies generating $55 million in annual gross revenues. Commentary included with that update indicates steps are being taken to close that deal, including measures to protect shareholder value. Once the deal closes, it gives CEI working interests in 169 producing oil wells (producing 2000 barrels of oil per day), 174 proved non-producing wells, and 12 proved underdeveloped well locations. But even before closing that deal, analysts covering Camber Energy model for significant near-term growth.
Lead analyst at Goldman Small Cap Research models for CEI shares to reach $2.75 this year. That target is supported by his factoring in the value inherent to its planned acquisition and merger with VKIN, which he expects will happen in Q3. According to the report, the combined revenue-generating firepower supports a steepening of CEI’s stock price trajectory. Though Camber is already a diversified energy equipment and services company, Goldman believes the merger, once closed, would create new and lucrative opportunities. Specifically, he expects the combination will enable Camber to capitalize on expanded target market potential by adding new revenue streams from custom energy and power systems and services, clean energy technology, and oil and gas interests.
He noted the deal is taking more time than expected to close. However, with CEI already a majority owner in VKIN and both companies understanding the values added, the risk of not finalizing the deal is significantly mitigated, leaving a larger CEI better positioned than ever to capitalize on and maximize the revenue potential inherent to a fortified pipeline business. He provides supporting evidence by using inputs from CEI and VKIN.
Goldman’s full-year proforma revenue forecasts for the combined company to score $31 million in 2023 revenues, surging to $42.4 million in 2024. Estimates do not include expected revenue contributions from any deal or acquisition prospect not yet in the pipeline. That’s excellent news for those considering CEI ahead of the planned addition of $55 million in new revenues, noting that Goldman’s modeling for share prices to reach $2.75 over the next 6-9 months result from just a finalized merger with VKIN and applying a 4X 2024E revenue. That multiple is based upon a review of peers in the ESG, energy, and specialty industrial equipment sectors. Still, while the model is decidedly bullish, it does not include the expected contributions from its other planned acquisitions.
Targeting Rev-Gen Diesel Market Opportunities
That includes its 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 roughly 43,000,000 gallons annually. It’s a timely deal. Renewable diesel fuel, sometimes called green diesel, is a biofuel 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 more to appreciate about that interest. Global renewable energy consumption is increasing annually, a trend likely to continue as government mandates and voluntary shifts to less carbon-intensive energy sources by businesses and individuals accelerate that initiative. Keep in mind that the deal is still in the works. Camber’s obligation to complete the transaction is conditional on several items in the Membership Interest Purchase Agreement. There is no guarantee that the conditions will be satisfied.
With that said, meeting those conditions and closing the deal could add to what’s already expected to be a transformative growth period for CEI in 2023. And keep in mind that potential is in addition to the value expected from its other revenue-generating acquisition. Thus, investing wisely ahead of the planned acquisition, especially with further news supporting nearing the close of that deal, adds to the long-term opportunities.
Capitalizing On A Valuation Disconnect
Keep in mind that the short-term play is attractive as well. All tolled using the sum of its parts, CEI shares at current prices expose a valuation disconnect between assets, share price, and potential. In fact, trading at just $1.25 today, the value inherent to its existing portfolio justifies higher share prices even before closing any planned transaction. Still, while those assets support a bullish thesis, investing on that premise alone would be shortsighted to the value expected from an active playbook.
In fact, Camber Energy has completed far too much work to let the value inherent to VKIN and its other planned acquisitions slip away. And with shareholders of all the entities involved benefiting from the deals CEI is making, it’s unlikely any of it will. By the way, for those liking a more line-item representation of how these new assets impact the growth trajectory at CEI, click on the analyst models. They show how and why these deals add immediate value and support a compelling argument that encapsulates the totality of revenue-generating initiatives driving the value proposition. Those highlights do more than expose a valuation disconnect between share price and assets; they model what’s expected upon their closing. In short, a potentially bullish ride for CEI investors.
Entering the middle of Q2, CEI has some groundwork to complete before benefiting fully from its ambitions. However, better positioned than ever financially and fundamentally to close their planned acquisitions, it’s fair to assume that the company is more than on the runway for growth; they are also marking the checklist ahead of takeoff. In other words, positioning while CEI is in taxi mode may be a timely consideration.
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