Energy has been one of the few sectors that held up in 2022. With the invasion of Ukraine showing no signs of abating, oil and natural gas producers remain a hot pick for investors. However, Camber Energy (NYSEAMERICAN:CEI) has not participated in the energy boom. In fact, CEI stock is down 55% year to date.
This is quite a lackluster performance given the strong returns from other oil and gas companies.
Traders might naturally think that Camber is bound to catch up with its peers sooner or later. However, the underperformance of CEI stock comes with good reason.
Success Has Eluded Camber Energy
Historically, Camber has not been a particularly successful company.
As I wrote a few months ago, “Camber Energy has a long and winding corporate history. It used to be known as Lucas Energy, and when that firm ran into trouble, it reorganized and became Camber. Camber, in turn, did deals with Viking Energy (OTCMKTS:VKIN), which operated oil properties in Texas, Louisiana, and other nearby states. This didn’t generate much success either, however.”
In the first quarter, Camber generated just $136,407 from its oil and gas operations despite rising energy prices. That wasn’t nearly enough to turn a profit, as Camber produced a $1 million loss from operations during the quarter.
Even if oil and gas prices continue to rise, Camber’s current revenue base is simply too small to deliver much shareholder value.
Perhaps that’s why the company is trying to change its story. As InvestorPlace’s Louis Navellier pointed out last month: “Viking has been repositioning itself as a diversified clean energy and power solutions provider — mostly, through its Canada-based Simon-Maxwell unit. Although its legacy business is in power solutions products, the company is looking to use it as a vehicle to commercialize carbon capture technology it has licensed from a third party.”
It’s certainly possible that Viking’s carbon capture venture takes off. Yet, any successful commercialization of these efforts will require a lot more capital. Given that Viking and Camber trade well below $1 per share, raising said capital could be challenging
CEI Stock Sports an Inflated Market Cap
CEI stock trades for less than 40 cents per share, which might make it seem like a bargain. But the low share price doesn’t tell the whole story.
Camber has issued a massive number of shares over the years to fund its operations. As a result of Camber’s dramatic share-count dilution, it still has a market capitalization of $157 million. That’s a lot of money for a penny stock with a hit-or-miss track record.
Don’t be surprised if Camber executes a reverse stock split at some point to get its share price back to a more respectable level. This would likely reduce trader interest in the stock among folks who are drawn to it due to the low share price and hopes of a short squeeze.
CEI Stock Verdict
The oil and gas industry is enjoying a renaissance after a miserable decade. There are many great oil and gas stocks worthy of investor capital today. CEI stock is not one of them.
Its track record is subpar. And though the company’s plans for carbon capture and ESG-friendly fuel alternatives may be interesting, there is little in the way of tangible evidence that they will succeed.
Don’t let the low share price mislead you. CEI stock is still selling at a high valuation compared to the current state of its business. That makes Camber a poor choice to participate in the current energy industry recovery.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.