Oil and natural gas developer Vanguard Natural Resources, LLC (NASDAQ:VNR) continued to take it on the chin after it was downgraded by the second analyst within the space of a week.
Vanguard Natural Resources, LLC (NASDAQ:VNR) yesterday slipped 14.74% to $0.86 after Hilliard Lyons downgraded their take on the company from Buy to Neutral. Over 4 million shares changed hands.
Earlier, Stifel moved their rating down from Hold to Sell and indicated a price target of $0.50, citing the company’s liquidity difficulties and upcoming credit redeterminations.
Vanguard Natural Resources, LLC (NASDAQ:VNR): Bankruptcy wolf at the door?
Last week Reuters said VNR had retained Evercore Partners to advise on restructuring so as to improve its finances after the debacle in oil prices over the past two years.
It was also reported that banks cut VNR’s borrowing base 26% from $1.8 billion to $1.325 billion, a much more lenient action considering the fate of other borrowers in the same industry. This helped to avert VNR’s bankruptcy, according to analysts, at least for the time being.
“Too much of our debt is under our reserve-based credit facility with our banks who re-determine the value of our reserves and our borrowing base every six months based on our own price tags,” said CFO Richard Robert on the last conference call. “As commodity prices have declined, our borrowing base has been reduced and our liquidity has declined.”
Unfortunately these problems are likely to continue even if the oil price and VNR’s cash flow improve – because the banks may not restore credit limits.
Vanguard Natural Resources, LLC (NASDAQ:VNR): No room to hide
The monthly chart of VNR shows the stock has fallen from a high of $26.62 in July 2014 to the current level of $0.86.
With oil prices showing no sign of a meaningful retracement, it appears the VNR stock price is likely to languish at these levels, or lower, in the foreseeable future.