What: Shares of Bonanza Creek Energy (NYSE:BCEI) surged more than 27% on Friday. Fueling the buying spree were its better-than-expected third-quarter results and the announcement of an asset sale.
So what: Bonanza Creek Energy reported an adjusted loss of $3.6 million, or $0.07 per share. However, that was a much narrower loss than what analysts were expecting, with the consensus estimate being that the company would lose $0.21 per share during the quarter.
One of the major contributing factors behind the better-than-expected showing was a sharp decrease in its cash operating costs. Those costs were down to just $14.01 per barrel of oil equivalent, which was 16% lower than just last quarter.
The other big fuel behind today's surging stock price is the announcement that Bonanza Creek Energy has agreed to sell its Rocky Mountain Infrastructure subsidiary for up to $255 million in cash to a private midstream company. Under the terms of the deal, Bonanza Creek will receive $175 million in cash paid upon closing and an additional $80 million to be paid over a two-year period dependent upon certain drilling targets being met.
Now what: The asset sale will provide a big boost to Bonanza Creek's liquidity, enabling it to increase its financial flexibility during the currently tough operating environment. It will also mold the company's drilling plan for 2016, which will be geared not toward growing production but toward drilling the wells needed to earn the incentives set out in that deal. That will take away a some of the sting of oil prices, should prices remain weak next year.