Viking Energy Group Inc (OTCMKTS:VKIN) fills a very important niche in the ecosystem of current investment opportunities – it is a speculative small-cap oil play that should, over time, be tethered to the price of oil, and during a massive oil bull market.
First off, if you didn’t realize we are currently in “a massive oil bull market”, that’s understandable because oil isn’t at all-time highs or anything. People are only just beginning to notice the proverbial “pain at the pump” issue. The financial media hasn’t been covering the oil trend very much. And oil stocks have been lagging the market over any multi-year view.
So, it’s perfectly understandable to have missed this. BUT… Oil is the top-performing asset in the world so far in 2021. And the underlying fundamentals suggest that status will only be further concretized over coming months. Even OPEC recently admitted that global oil would be in deficit next month. The forward curve is steeply backwardated. And yet, no one is moving to increase supply.
Because major producers are still stung from levering up balance sheets to over-produce only to run smack into last year’s Covid-19 crash, and it takes time and money to restore that shuttered production capacity. This is especially scary with that Delta variant rampaging around the world and threatening to spoil the global reopening trade by skipping past current vaccine efficacy boundaries.
So, all things told, it’s tough to lever up the balance sheet yet again when you might just get burned once more. We also have a recent move toward political constraints on investing in new oil production capacity expansion.
Both of those factors have constrained non-OPEC production growth. As long as that context remains in place, the folks at OPEC are only too happy to hold off on production hikes while they watch the value of their massive in-ground reserves go through the roof.
So, where does that leave a small producer like VKIN? In an extremely good spot.
For investors, it isn’t easy to find speculative plays in the oil space that should become levered to a strong oil trend over time. It suggests the potential for the stock to snap into gear eventually as long as it keeps expanding its own production capacity.
Recent numbers suggest that trajectory is in place.
Growth in Play
Viking Energy Group Inc (OTCMKTS:VKIN) bills itself as an independent exploration and production company focused on acquiring, enhancing, and developing oil and natural gas properties in the Gulf Coast and Mid-Continent regions.
It has assets in Texas, Louisiana, Mississippi, and Kansas. It is also currently the majority-owned subsidiary of Camber Energy Inc (NYSEAMERICAN:CEI), and a merger agreement is in the works that could increase the value of both companies through geographic and operational synergies.
VKIN recently posted sturdy results for Q1, including revenues of nearly $10.5 million and an adjusted EBITDA of $4.63 million.
James Doris, President and Chief Executive Officer of both Camber and Viking, commented, “We are pleased with Viking’s Q1 results, especially following the unprecedented conditions experienced in 2020. We are extremely encouraged with the foundation we have established, and are intensely focused on pursuing growth opportunities.”
Importantly, the company was able to drive nearly 20% sequential quarterly topline growth ahead of any clear sense of full economic “reopening”, when analysts expect energy demand to grow significantly. That bodes well for coming numbers.
A Look at the Chart
Viking Energy Group Inc (OTCMKTS:VKIN) recently broke above its standing downtrend line as well as the key 50-day MA.
This suggests a potential shift in major trend direction. Given the narrative above, shareholders here hope the spell is finally broken and that this stock can get on with being a producer of the stuff that keeps rising in price faster than anything else in the world.
VKIN shares have also recently registered a Bull MACD Divergence, with its most recent low coming on strengthening upside momentum under the surface of the tape in the stock.