Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Small U.S. independent oil and gas producer RSP Permian Inc (NYSE:RSPP) stock was down as much as 11% in early trading, after announcing that it would issue 5 million new shares of its stock and sell them for $25.80 per share.
So what: This comes after a similar stock offering last year. Combined, the two stock offerings have diluted existing shareholders out of more than 10% of their ownership of the company. However, RSP Permian Inc's stock has fared better than that of many of its independent producer brethren since last summer:
Faring better isn't the same as doing well, however -- as you can see, its stock is still down 22% since June.
Now what: The company intends to use the proceeds to pay off the balance of its revolving credit line, general business purposes, and -- get this -- buy back common shares. I have to admit that the last bit seems a very bizarre use of a stock offering...
RSP Permian -- as a producer -- operates in the same cheap oil environment as every other producer, but does have some relatively compelling economics in its favor, as a low-cost producer. If you're looking to invest in a small regional-specific producer, RSP Permian isn't a terrible choice. Just acknowledge that oil prices could conceivably fall further, and that its stock is likely to remain volatile no matter what commodity prices do.
Looking for a stock that's less tied to the price of oil? Check out the free report in the link below.