BREAKING NEWS (7/6/2022): HNRC has just released news that it is spinning off its Non-Energy Assets into a separate company. Shareholders will receive $1.75 worth of equity for every HNRC share they own.
The stock is already up 50% since announcing the news. The stock’s last trade was $0.24.
That means once you buy an HNRC share you can expect a 629% return AT AN ABSOLUTE MINIMUM once the dividend is paid…and that doesn’t even factor in the significant value that can still be gained from the remaining assets in HNRC!
This alone should make you drop everything and start your research process on HNRC, with every uptick you lose potential profit margin…
But that’s just the sweetener, read more to see why the remaining company post-spin-off still has a ton of value and upside on its own, meaning this could be the best investment you make in 2022.
Undervalued Oil and Gas company with a proven 33 million barrel oil project in place…
Set to pay quarterly dividends starting in 2023…
Trading at a 90% discount to its Book Value…
If the company were to be acquired today at a fair price, investors would receive an 895% premium on their investment!
A $10,000 investment would pay out ~$99,581 at a $2.39 exit!
In other words, you’d be $89,581 richer!
Why is HNRC so undervalued?
Simple, it trades on the OTC markets so fundamental value investors have not caught this easy arbitrage play…YET.
The company has announced its plans to uplist this year and has engaged a firm to audit its past two years to meet uplisting requirements to the QB.
This among other catalysts will bring a brand new crop of seasoned investors to the table and as Wall Street sharps learn about this revenue-generating, dividend-paying energy play, you can bet HNRC will not remain undervalued for long.
These opportunities are few and far between. Keep reading to see why HNRC needs to be on top of your watchlist immediately!
Oil and Gas is a hot commodity…literally. Energy stocks are seen as a top hedge against inflation, and with geopolitical factors already causing a sharp rise in crude prices, this has been doubly true.
Since many of the top plays in the sector have been run-up, it has become harder to find value. Luckily, we were able to identify a ridiculously undervalued oil & gas stock that’s major fundamental indicators all point to a stock that could be trading at $2.39…AT LEAST. The company’s net assets indicate that if it were to sell the company today it would be worth $2.39/share…the stock currently trades under $0.25/share!
Houston Natural Resources Corp. (OTCMKTS: HNRC) is an undervalued oil & gas company with several interests including nearly $90 million in potential oil reserves and is on schedule to pay dividends quarterly starting in 2023. The dividends are just icing on the cake, because investors at these prices could see significant value well before receiving their first dividend.
Look at some of the company’s fundamental indicators:
Book Value Per Share (BVPS): $2.39
Trailing 12 Month (TTM) EPS: $0.27
TTM Sales per Share: $0.63
HNRC is currently trading under 25 cents per share, this is a SIGNIFICANT undervaluation.
How often can you buy a stock trading below its EPS?!
Energy stocks are trading at 17.8 times earnings,
At that PE ratio, HNRC would be $4.80 per share.
A $10,000 investment at the current price with an exit at $4.80?
That would net around $199,996!
YOU DO NOT SEE THIS EVERY DAY! Contact your broker and ask them about this fundamental undervaluation, they might thank you for the tip!
These numbers are fantastic, but as you’ll see if you keep reading…they could be even better by the end of the year.
HNRC’s Rapid Revenue Growth Rate
HNRC announced record results for FY 2021 ending December 31, 2021. The company then followed that up with even more growth for the quarter ending March 31, 2022. Q2 2022 could hit any day, and judging by the growth trajectory could be even better!
FY 2021 Year over Year Highlights:
- Total revenue up 91%! ($18,217,737 vs $9,523,634)
- Total earnings up 157%! ($7,636,830 vs $2,973,320)
- Total assets up 2%! ($74,251,027 vs $72,514,735)
- EPS up 84%! ($0.35 vs $0.19)
On average energy companies have annually grown revenue by 5% and earnings 11% over the last 3 years.
HNRC grew its revenue by 91% and earnings by 157% in 2021.
The company is outpacing its peers by a large margin.
Speaking of large margins, in 2021 its profit margin was 42%…If Q1 2022 is any indicator this year’s growth could be even bigger, as HNRC’s margins for the quarter were 57%. Other key numbers from Q1 include:
Q1 2022 YoY Growth
- Total revenue up 41%! ($3,562,169 vs $2,518,986)
- Total earnings up 123%! ($2,062,075 vs $920,866)
- Total assets up 2% ($73,973,967 vs $72,616,087)
This Q1 growth could mean 2022 will be even bigger than 2021, and that would be huge for investors ahead of the company’s first dividend payments.
About those dividends…
HNRC SPAC Strategy & Dividend Schedule
One driver of the company’s revenues, earnings, and assets are its SPAC investments.
The company sponsored a successful $86 million NYSE listing of an energy-focused SPAC during the first quarter of 2022 (NYSE: HNRA). HNRC is currently evaluating six other SPAC opportunities and has identified a third SPAC for listing in the third quarter.
The company intends to sponsor one SPAC investment in each quarter of 2022.
This strategy will result in a dividend to its shareholders, after the lock-up period has expired, on each of the SPAC investments. This would provide quarterly dividends through the end of 2023.
The company expects to realize at least $3m on each of its SPAC investments to be added to its existing earnings in 2022 and 2023. This could provide shareholders with more than $0.30 per share in annual dividends.
What is a SPAC Investment?
“A special purpose acquisition company (SPAC) is a company that has no commercial operations and is formed strictly to raise capital through an initial public offering (IPO) or the purpose of acquiring or merging with an existing company.
Also known as “blank check companies,” SPACs have been around for decades, but their popularity has soared in recent years. In 2020, 247 SPACs were created with $80 billion invested, and in 2021, there were a record 613 SPAC IPOs. By comparison, only 59 SPACs came to market in 2019.” (Investopedia)
HNRC’s Proven Oil Producing Property
HNRC acquired approximately 2,800 acres located in the Halff Oil Field in Crockett County, Texas. This oil field is noteworthy for several reasons:
- Located in the most prolific oil area in the USA.
- An existing oil field with proved reserves and 83 oil wells to be reworked.
- Has a prolific oil zone called the San Andres formation that has not been exploited at the present time. The primary producing reservoir is the Grayburg sand of the Permian age.
- The Halff Oil Field has produced about 3,900,000 barrels of oil to date from the Grayburg Sand.
- The original oil in place in the Grayburg Sand is calculated to be 36,900,000 barrels of oil.
- This Zone has been producing oil for over 50 years including the Halff Oil Field.
- It will continue to be a productive area for at least another 20+ years.
If we do some quick math, the property has a total of 33 million barrels of oil left to be extracted. At today’s prices, that’s ~$3.9 billion in oil reserves!
Once the company begins to extract oil from this property the revenues will only improve, but there are even more immediate sales opportunities to be excited about…
ESG Component: Waste Water Treatment
The one-year growth rate of ESG fund launches in the United States is more than twice that of funds without, 80% versus 34%, respectively (Deloitte). This is a reflection of the growing interest in ESG among investors. When you hear “oil & gas” you don’t normally think ESG, however, that’s an intriguing and beneficial wrinkle to HNRC’s investment thesis.
HNRC is developing water treatment facilities operated by its subsidiary HNR Oil Services, LLC. The initial facility is currently permitted for the disposal of 25 thousand barrels per day of oil field toxic waste fluids and is permitted and will soon expand to sterilizing oil field toxic solids waste.
These unique permits allow HNR Oil Services to issue its customers a Texas State Certificate of Destruction of such toxic waste. This is an especially important step in environmental protection by keeping toxic materials out of land fields.
HNRC has been developing a network of wastewater treatment facilities and is expected to close on its latest acquisition this summer.
The acquisition target is a water well services and drilling company with:
- 68% recurring customer/service revenue historically
- 80% recurring customer/service revenue projected going forward.
Financial highlights from the acquisition target ‘WWA’ which has been in business for 7 years include:
2021 WWA Revenue + Earnings
- Revenue- $7.2 million
- EBITDA- $500k
2022 WWA Guidance
- Revenue- $8.5 million
- EBITDA- $1.0 million
2023 WWA Guidance
- Revenue- $11 million
- EBITDA- $1.5 million
By adding this acquisition the company will potentially increase its annual revenue by around 45% immediately (if added to the 2021 number which we’ve covered is already on pace to increase).
With an 88% profit margin, this will only increase the company’s earnings, but that’s not all.
The equipment appraised at $13 million dollars will be part of an increase of $10 million in the company’s assets.
The company has received financing commitments for the transaction which will be a combination of cash and securities. The company intends to continue to acquire additional wastewater treatment facilities and technologies to provide for a nationwide network of wastewater treatment plants.
HNRC NEEDS TO BE ON TOP OF YOUR WATCHLIST
Look at these numbers one more time:
Book Value Per Share (BVPS): $2.39
Trailing 12 Month (TTM) EPS: $0.27
TTM Sales per Share: $0.63
HNRC’s currently trading under 25 cents!
Any way you look at it, this is a SIGNIFICANT undervaluation.
Then if you consider all the revenue-boosting acquisitions and investments the company is making, these numbers figure to get much better.
PLUS the company is set to pay quarterly dividends at the end of the year.
How often do you see that on the OTC markets?!
HNRC could blast off immediately once the public finds out about the company’s significant undervaluation.
Start your research today!
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