Warren Resources, Inc. (WRES)

Mmm...energy...

Warren Resources is at a crossroads in regard to whether it can become financially viable or whether the natural gas price decline will keep it from investing at a rate needed to maintain a sufficient revenue stream to continue investing in new drillings. The smaller producers have to balance capex with debt or risk thier non-producing wells or end of life wells zapping them of future gains by new drilling. Warren resouces took a large hit in their share price this week after it priced it's new share offering of 11.78 million shares at $2.60 apiece, or 14 less than the price at the time. The further decline in price to $2.56 is below the "dilution" price. In general, I don't view all stock issue as dilutive. It depends on what is done with the proceeds. New capex or a means to increase revenue can be positive in the long run. Overall Warren intends a mix of reducing debt and development activities in California and Wyoming. If natural gas prices remain depressed then I see Warren Resources as high risk. Overall, a cold snap this winter and successful drilling of new wells should put Warren back to profitable with a share price in the $4 range.