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Tuesday, October 27, 2020

Saratoga Resources, Inc. (OTCMKTS:SARAQ) Phoenix Rising from the Ashes

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Saratoga Resources, Inc. (OTCMKTS:SARAQ) is a stock that apparently shocked the market yesterday by court approval of a reorganization plan to emerge from Chapter 11 protection with the following language included: “Provided that Classes 1, 3 and 4 vote to accept the Plan, Allowed Existing Equity Interests shall be retained by the holders thereof and shall automatically constitute Equity Interests in Reorganized Saratoga.  In the event that Classes 1, 3 and/or 4 do not vote to accept the Plan, then Existing Equity Interests will be cancelled and extinguished as of the Effective Date and New Equity Interests in Reorganized Saratoga will be issued to the Litigation Trust LLC.”

In other words, the common was not cancelled. This is rare enough, and certainly almost unheard of to see it come as a total surprise. As a result, shares of SARAQ stock were up as much as 11,665% during the day. And closed up by over 6,500%. Note that the float on record is small at just 17.16M shares, which clearly has something to do with the complete explosion higher. The news hit, the plan was interpreted, the language was very clear and came as a surprise, and then the chase was on, with hoards of buyers competing over just a handful of shares rattling around on the tape.

Saratoga Resources, Inc. (OTCMKTS:SARAQ) trumpets itself as an independent oil and natural gas company that acquires, exploits, develops, and produces crude oil and natural gas properties in the United States. Its properties consist of approximately 51,500 acres under leases, including 31,700 acres gross/net located in the transitional coastline in protected in-bay environments on parish and state leases in south Louisiana; and 19,800 acres gross/net under federal leases in the shallow Gulf of Mexico shelf.

As of December 31, 2014, the company had proved reserves of 10.2 million barrels of crude oil equivalent (MMBoe), including 5.8 million barrels of oil (MMBbls), and 26.6 billion cubic feet (Bcf) of natural gas; and 25.9 MMBoe comprising of 10.4 MMBbls, and 93.2 Bcf of natural gas.

Saratoga Resources, Inc. was founded in 1990 and is headquartered in Houston, Texas.

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According to details in the reorganization plan, the company retained selected non-producing oil and gas assets, including license to more than 450 square miles of high-quality seismic data.

All first and second lien debt was discharged. All shares of common stock outstanding prior to bankruptcy continue to be issued and outstanding, as noted above. In addition, the company is substantially debt-free at this point, and its outstanding shares remain unchanged.

SARAQ has a experienced team in place. Thomas Cooke, Andrew Clifford and Rex White, Jr. continue to serve as directors. From here, management “plans to evaluate retained assets with a view to developing a post-bankruptcy plan of operations”.

Mr. Cooke has 30 years executive experience as an Independent Oil and Gas Producer. His many accomplishments include the founding of a wholly owned company, Texas Petrochem, Inc. (TPI) in 1987.

Now commanding a market cap of $10.5M, SARAQ has a clean slate. But, with oil struggling again, this last part of the situation (future operational strategy) will define where the stock trades going forward. It’s out of bankruptcy because it’s debts have been wiped out. But that doesn’t necessarily mean it will succeed. That said, the company has raked in $27.88 mln on a trailing year basis. And it has large proven reserves. We will check on this stock again very soon and cover any new indications. For continuing coverage on shares of $SARAQ stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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