Laredo the third oil/gas company seeking reverse stock split in 2020
The number of Oklahoma-based oil and gas producers that have conducted or plan reverse stock splits to keep their shares active on major exchanges climbed to three the final week of March.
Tulsa-based Laredo Petroleum will ask its shareholders on May 14 to modify its registered certificate of incorporation, allowing it to conduct a reverse split that would reduce the number of shares for the company to boost each remaining share’s value.
It did not reveal in a filing how many shares it would combine to create a new single share of its stock, which is currently traded on the New York Stock Exchange under the ticker symbol LPI.
The company received a notice from the exchange March 27 that its stock is in danger of being delisted from the platform, giving it six months to get its average monthly share value back to at least $1.
On Jan. 7, the company’s stock achieved a high mark for the past six months when it closed at $2.97 a share. On Thursday, it closed the day’s trading at about 38 cents a share.
In a short letter included in proxy materials sent to investors, the company’s board Chairman Randy Foutch and its CEO Jason Pigott outlined the company’s accomplishments and challenges it overcame in 2019.
“We dramatically improved corporate profitability as we focused on cash margins while reducing our costs incurred, excluding acquisitions, by 25% and weathering a 26% decrease in average sales price per barrel of oil equivalent,” the letter states.
The letter mentioned Laredo completed a yearlong process to revamp its leadership team to effectively exploit recent bolt-on acreage acquisitions it had made in the Delaware Basin, while lowering its drilling, completion, lease operating and general administrative expenses.
The company in January offered investors an opportunity to acquire $1 billion in senior notes that will be due in 2025 and 2028, using those proceeds to retire debt that was due earlier.
“We believe that as we execute our strategy and focus on maintaining our high environmental and safety standards outlined in this proxy statement, we can create value for all of our stakeholders,” it states.
Laredo isn't alone.
Stock values for companies in the energy industry generally trended lower the last half of 2019 and especially into this year, as energy analysts and government agencies predicted more supply in global crude markets than the expected demand growth could absorb.
Throughout the year, the number of active rigs drilling for oil in the Lower 48 steadily declined 23%, from 877 oil-directed rigs at the beginning of 2019 to 674 rigs in mid-November.
In Oklahoma, the decline was more pronounced. Only 51 rigs were running Jan. 3, compared to 140 the same week in 2019.
Crude oil values also collapsed, especially since the start of this year when the price for a barrel of West Texas Intermediate crude fell from $61.14 a barrel Jan. 1 to $19.48 a barrel on March 23.
Later this month, Chesapeake, which received its New York Stock Exchange delisting notice in December, will hold a meeting where it will ask its shareholders to consider a reverse stock split.
Company officials have stated the reverse split could combine as many as hundreds of shares into one.
The last time CHK was more than $1 was the first week of November. On Thursday, it closed at about 16.8 cents a share.
Chesapeake earlier scheduled its meeting for April 13. Given the ongoing coronavirus pandemic, shareholders could be required to participate remotely.
One Oklahoma-based oil and gas company already acted to combine its shares through a vote taken by its board of directors.
Mid-Con Energy Partners announced the first week in March its board would consider executing a reverse split of 10 shares for one.
On March 20, it announced its board had executed the maneuver, combining 20 units for one. The company delayed the effective date of the reverse split until April 9.
However, that won’t be soon enough to prevent its stock, traded on NASDAQ under the ticker MCEP, from being delisted.
NASDAQ told the company last week its stock would be delisted when trading begins April 7.
The company stated in a regulatory filing it will seek a hearing with NASDAQ officials to prevent that from happening. Its stock closed Thursday at 14 cents per share.