Some Housekeeping Items – Escalera Resources

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We have gotten some notes from readers  today dealing with Escalera Resources (ticker:ESCR) and their preferred (ticker:ESCRP) which has taken a massive pounding the last few days and is now down near $9/share.  The common is way down at 47 cents.

Escalera Resources is a small natural gas producer which previously named Double Eagle. The company generates virtually all their revenue from natural gas sales. They have about 75% of their production hedged for 2015 at a reasonable value.

The company has shown annual losses for years because of large depletion (depreciation) charges, but has been relatively profitable when these non cash charges are taken out.


While on a purely financial basis we find no obvious reason for these falls the market will do what they do.  What we do know is that when the common shares of any company fall into the 50 cent area all securities they have outstanding will be painted with the same brush.  Talk of bankruptcies etc breaks out – regardless of what we think are the facts.  We can’t say whether one should sell it, but it or hold it–it is just a matter of personal choice. We sold our positions weeks ago (fortunately) and took our lumps at that time. 

The problem we are finding with all of our energy company research is that all public data is almost 4 months old (September 30th data) and things have changed a bunch since then in many sorts of ways.  We know that Escalera Resources had their borrowing base reaffirmed by Credit Suisse on 12/22 so at that time Credit Suisse found it ok to reaffirm the base--if they thought there were larger emminent problems they may have lowered the borrowing base.

To summarize. There is no new news anywhere that we can locate.  As of last quarter cash flows were more than adequate to cover preferred dividends. Lastly common and preferred stocks will do what they do–many times based on nothing but whispers–and sometimes based on information has slipped out of someones lips.

Tim McPartland

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Tim McPartland
Tim McPartland is a private investor with over 45 years of investing experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.
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