Sunday, March 7, 2021

GTE stock: Oil stock under watch

March 7, 2021

Introduction

It is hard for me to predict if GTE is the stock which will double the value in next three months. 

Here are highlights:

  1.  Facts to review: Importantly, even the CEO of the company dove in with a massive buy, purchasing 688,000 shares of GTE. 
  2. the company is expecting to pay off its entire RBL facility this year.
  3. Balance sheet - 

Gran Tierra Energy Inc (NYSEAMERICAN: GTE) is running for the top in the market this morning. However, without any press releases, many are wondering why. The gains seem to be the result of recent SEC filings showing that management in the company has been piling up on shares. 

Here’s what’s happening:

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Gran Tierra Energy Management Snaps Up Shares

As mentioned above, Gran Tierra Energy is headed up in the market this morning, following a series of SEC filings showing that management is buying shares. According to the filings, management in the company has purchased over $1.9 million in shares of the company this week at prices around $0.80 per share. 

Importantly, even the CEO of the company dove in with a massive buy, purchasing 688,000 shares of GTE. 

Why Investors Are Excited

There are multiple reasons that investors get excited when management buys shares. First and foremost, when management buys shares of a publicly traded company, as we saw with GTE, it shows investors that management interests are aligning with their own. After all, if the investors experience losses, management that bought into the stock will experience losses as well. 

Moreover, big management buys often signal good news to come. After all, nobody knows what’s going on at a publicly traded company quite like those that manage it. With such strong buys from GTE insiders, the filings are a clear sign that something big may be on the horizon. 

First and foremost, the company is expecting to pay off its entire RBL facility this year. Paying off the facility will provide further strength to the company’s balance sheet, improving the overall picture and likely driving investor interest. 

Moreover, production is climbing, and expected to continue on the same trajectory. As a result, investors are excited about coming announcements surrounding the production growth the company is experiencing. 

Not to mention, GTE operates in the oil and gas industry, and big banks have suggested that oil’s super cycle has begun, which could send oil as high as $80 per barrel. 

This is the result of increasing demand, which is likely to continue. After all, COVID-19 lockdowns are over, vaccines are getting into arms, and consumers are traveling again. All of this bodes well for the oil industry, and for GTE stock. 

What Analysts Think About GTE Stock

At the moment, analysts aren’t the biggest fans of Gran Tierra Energy. In fact, according to TipRanks, there are four analysts currently covering the stock, two of which rate it a Hold and two of which rate it a Sell. 

Price targets range from $0.39 to $0.94 per share, with a median price target of $0.76 per share. Nonetheless, it’s important to keep in mind that the vast majority of this analyst coverage is outdated. In fact, these targets were provided before demand for oil started to climb and before several key announcements were made by the company. As a result, I’m expecting for analyst opinions to shift to the positive direction relatively soon. 

Risks to Consider Before Buying GTE Stock

Before diving into GTE stock, it’s important that you consider the risks. After all, there’s no such thing as a risk-free investment. When it comes to Gran Tierra Energy, the most significant risks include:

  • Pennies. GTE is a penny stock. This means that the company is known for experiencing hefty volatility, making entrance and exit decisions difficult. 
  • Profitability. GTE is not a profitable company as of yet. So, the money the company has in the bank needs to last it through to profitability. If those funds don’t stretch far enough, the company may look to public markets as a way to raise funds, resulting in the dilution of existing shareholder value.
  • Energy Industry Changes. More and more, we’re seeing a push away from oil and natural gas and into clean energy. While this transformation will take some time, electric vehicles now account for about 7% of new car sales. Not to mention, solar and wind power are becoming increasingly popular. As this trend continues, demand for oil may decline, resulting in losses for GTE. 

Final Thoughts

All-told Gran Tierra Energy may come with risk, but represents an interesting investing opportunity. With management snapping up shares like they’re going out of style, there could be a few massive catalysts on the horizon. As such, GTE stock is one to watch closely. 

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