One stock that may see some interest today is Viking Energy Group Inc (OTCMKTS:VKIN). Not only is this a small-cap energy play – one of the most sought after niches in the market of late – but it is also the primary operating asset of Camber Energy Inc (NYSEAMERICAN:CEI), and CEI has some big news out this morning that holds direct implications for VKIN.
CEI just announced this morning that it closed a $15,000,000 equity transaction from an Institutional Investor. The most important part, as described in the release, is that this is a premium-to-market convertible deal that appears to help dispense with apparent dilution risk from other notes in play for CEI – and thus, for VKIN.
According to the release, the company plans to use the funds for “working capital, new acquisitions (directly or through the Company’s majority-owned subsidiary), and other purposes.” In other words, the funds could help VKIN expand its production footprint.
As noted, in a separate transaction, the Company extended the maturity date of existing promissory notes from December 11, 2022 to January 1, 2024, and incorporated a conversion feature in each of the promissory notes entitling the holder to convert all or a portion of the principal amount(s) into shares of common stock of the Company at a fixed conversion price of $1.25 per share, which equates to an approx. 117% premium from the closing price of the common shares on July 9, 2021.
James Doris, President and Chief Executive Officer of Camber, commented, ‘These transactions serve as significant catalysts for advancing Camber’s growth initiatives. The $15M commitment by the institutional investor is encouraging and seemingly reflective of the confidence in Camber and our operations both short and long term. We are excited about the Company’s future and remain focused on forging a path toward profitability and increasing shareholder value.’
It should also be noted that Doris is the CEO of both CEI and VKIN.
A Little Context
Viking Energy Group Inc (OTCMKTS:VKIN) is 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. As noted above, VKIN is the majority-owned subsidiary of CEI, and a merger agreement is in the works that could increase the value of both companies through geographic and operational synergies.
At this point, Camber owns approximately 62% of the issued and outstanding common shares of Viking. Such interest was acquired in connection with the transactions described in Camber’s Current Reports on Form 8-K filed with the Securities and Exchange Commission on December 24, 2020 and January 13, 2021.
VKIN recently posted sturdy results for Q1, including revenues of nearly $10.5 million and an adjusted EBITDA of $4.63 million.
CEI has a direct interest in the success of VKIN, and now it has the resources to help drive that success.
This is particularly important given that VKIN is an active producer in the oil space during a major bull market in oil. In fact, oil is the best performing asset in the financial world so far this year, up over 60% already in 2021, with analysts at Bank of America recently projecting prices to continue higher to the $100/bbl level.
That has strong implications for the profitability and value of active producers of the commodity, and most oil stocks have been moving higher as a result. However, because VKIN is a name that has been flying under the radar, it hasn’t yet priced in this big macro upside factor.
Perhaps this infusion of capital into CEI will help spur that process.