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Friday, October 30, 2020

EXCO Resources Inc. (NYSE:XCO) Time To Buy?

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EXCO Resources Inc. (NYSE:XCO) has nervous investors wondering if there is a light at the end of the tunnel (that’s not a train). In both the energy and mining sectors, sharp swings in commodity prices could turn several speculative penny stocks into real winners. It’s important to keep an eye not only on spot market prices for commodities such as oil, gas and gold, but also on long-term secular changes that are changing the balance between supply and demand.

Within the oil & gas sector, one major change has been the embrace of shale gas & oil exploration, and one company that could be poised to profit from this trend is EXCO Resources (NYSE:XCO), a Texas-based oil and natural gas company with strong shale resource plays within the continental United States. The company’s three big shale oil deposits are located in Texas, Louisiana and Appalachia.

EXCO Resources (NYSE:XCO) has turned bearish on investors recently, with a consensus “sell” rating on the company. Shares of the company currently trade at $.958, and the price target for the company is only $0.50. That would seem to suggest that shares of the company are going to collapse to a 52-week low ($0.51), compared to a 52-week high of $1.94.

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XCO StockEXCO Resources (NYSE:XCO) has turned bearish on investors recently, with a consensus “sell” rating on the company. Shares of the company currently trade at $.958, and the price target for the company is only $0.50. That would seem to suggest that shares of the company are going to collapse to a 52-week low ($0.51), compared to a 52-week high of $1.94.

But it’s exactly this pessimistic market sentiment that might lead to a real bargain for the stock. This is not a tiny company – the total market capitalization of EXCO is $263 million, with 65% institutional investor ownership. Think of this as a chance to go contrarian.

As recently as July 2015, RBC Capital Markets had upgraded the company from “Sector Underperform” to “Sector Perform.” There’s also been a management change, with the company getting a new CFO on August 22, which could hint at a coming turnaround.

Chris Peracchi, EXCO’s current Vice President of Finance and Investor Relations, and Treasurer, will become Vice President and acting Chief Financial Officer effective August 22, 2016

Harold L. Hickey, EXCO’s Chief Executive Officer and President, commented, “We are pleased to announce that Chris will be assuming the position of EXCO’s Vice President and acting Chief Financial Officer. Chris joined EXCO in 2013 and has been serving as our Vice President of Finance and Investor Relations, and Treasurer, since 2014. He has over eleven years of experience in energy investment banking at KeyBanc Capital Markets and A.G. Edwards & Sons and four years of experience serving as an accountant at Coopers & Lybrand. We are confident that Chris’ background will enable a seamless transition, and his financial expertise will be effectively utilized as we execute our strategic plan.

So what’s happened in the past 12 months that has investors so down? One big factor has been the price movements in the oil and gas markets. At a certain price point, shale oil & gas exploration simply is not profitable enough. That could be what’s happening with the company’s stock –but as soon as momentum returns to the shale exploration sector, the stock could be poised for a rebound.

Keep in mind; the United States has access to significant shale resources. In the Annual Energy Outlook 2014, EIA estimated that the United States has approximately 610 Tcf of technically recoverable shale natural gas resources and 59 billion barrels of technically recoverable tight oil resources. As a result, the United States is ranked second globally after Russia in shale oil resources and is ranked fourth globally after China, Argentina and Algeria in shale natural gas resources.

EXCO Resources (NYSE:XCO) has been a volatile play recently, peaking in early May around $1.91 but has fallen dramatically since and the price has been nearly cut in half.  If current oil and gas price swings are any indicator of the future we could see some wild swings for (NYSE:XCO) and their peers in coming months. To get the inside scoop on XCO subscribe below to oracledispatch right now.

 

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