Without a doubt, Camber Energy (NYSE:CEI) is a speculative stock. Nonetheless, there are multiple reasons why this speculative name could potentially reward the owners of CEI stock quite handsomely.
No one disputes the fact that Camber owns a large stake in Viking Energy (OTC:VKIN) which produces a significant amount of oil and natural gas. Oil and natural gas prices are high and look poised to climb further.
Camber’s licensing deal with a company that has developed carbon capture technology bodes well for the stock, too. With Congress looking poised to incentivize carbon capture in a big way, that licensing deal could prove to be quite lucrative for Camber.
Finally, CEI stock has become a darling of the Reddit crowd, whose power has proven to be longer-lasting than I had previously predicted.
A Closer Look at CEI Stock
As of the afternoon of Oct. 19, the price of West Texas Intermediate oil had climbed to more than $83 per barrel. That’s the highest level in about seven years.
As supply challenges mount, due in large part to the curtailment of drilling in the U.S. and OPEC’s inability or refusal to meet its production targets, oil prices are likely to keep climbing for some time.
Also putting upward pressure on oil prices are the rapid return of demand amidst the winding down of the pandemic and high natural gas prices.
Speaking of natural gas prices, they recently reached a seven-year high in the U.S. and all-time highs in Europe and Asia. America’s Energy Information Administration expects natural gas prices to remain elevated through the winter.
As mentioned, Camber owns a 62% stake in Viking, and the two companies have agreed to merge.
In 2020, Viking produced over 624,000 barrels of oil and 5.2 billion cubic feet of gas. It sold much more, moving 24 million barrels of oil and nearly 9.4 billion cubic feet of natural gas.
Many have pointed out that Viking Energy has questioned its own ability to continue as a going concern and even failed to meet the terms of a debt covenant. However, given the level that oil and gas prices have reached, I believe that it will be able to keep making significant payments on its debt, preventing its lenders from forcing it into bankruptcy.
I should point out that, over the last couple of years, I bought very small amounts of two highly speculative energy names —Chesapeake Energy (NASDAQ:CHK) and Basic Energy Services (OTC:BASXQ). Both wound up going bankrupt.
I bought their shares because I correctly predicted that energy prices would soar, and I thought that bankers would see that development coming and allow those companies to avoid bankruptcy.
But bankers are very conservative types, and they may have needed to actually see the higher energy prices in place before factoring them into their financial models. As a result, now that the elevated prices have arrived, I am fairly confident that Viking’s bankers will let it avoid bankruptcy.
Camber’s Other Timely Asset
On Aug. 24, Viking Energy announced that it had agreed to license a carbon dioxide capture system from ESG Clean Energy.
It turns out that Senator Joe Manchin, who’s key to passing two bills that the Biden administration and Congressional Democrats are trying to get through, is a big fan of carbon capture technology.
Indeed, the Associated Press recently reported that “Manchin has pushed for carbon capture technology that would allow coal and natural gas to be burned while trapping harmful emissions.”
As a result, I believe that there’s an 80%-90% chance that the budget that ultimately gets passed by Democrats will include funds for carbon capture technology.
If that scenario materializes, whether the technology that Viking has licensed is as good, better, or worse than average, it will likely be able to obtain a significant amount of money from the federal government as a result of the new budget (which is also referred to as the “social spending” bill).
And Camber, in turn, should get a boost from Viking’s payday.
A Reddit Favorite
Camber appears to have become a favorite of the Reddit crowd. The stock even has its own room on Reddit, with nearly 8,000 members.
I had previously believed that the power of the Reddit traders would have mostly dissipated by now, more than a month after the last of the main, new federal financial support programs ended.
Yet, the Reddit crowd has still been able to keep crypto prices high and in some cases raise them. Some stocks, such as GameStop (NYSE:GME), have also remained elevated, thanks to Reddit-inspired traders and occasionally, Reddit fans are still even able to rapidly raise the prices of some stocks.
The Bottom Line on CEI Stock
Given Camber’s uncertain financial situation, outlined well by InvestorPlace contributor Mark Hake, its shares are indeed quite speculative and risky.
Nonetheless, in light of its multiple, positive catalysts and the fact that CEI stock is well off its highs, risk-tolerant, patient investors could profit a great deal from the shares.
Therefore, I believe that such investors should consider buying a small amount of the stock.
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On the date of publication, Larry Ramer held long positions in CEI and Basic Energy.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.