Yuma Energy (YUMA) Stock Update Triggers A Short Squeeze

Yuma Energy YUMA Stock News

Yuma Energy Inc (NYSEAMERICAN: YUMA) is rocketing in the market this morning, trading on early gains of more than 230%. The gains come after the company provide an oprerational update that proved to be positive, triggering a short squeeze. Here’s what’s going on:

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YUMA Stock Squeezes Out The Shorts With Positive News

Yuma Energy hasn’t had the best time in the market as of late. After hitting a high of $7.95 per share in late April, the stock has been tumbing as short sellers manhandled the ticker. That’s not the case today.

Early this morning, YUMA provided an operational update via press release. In the release, the company announced that significant steps have been taken to put an end to recent declines in daily production.

In particular, the company said that it has made the following progress:

  • Successfully installed a new jet pump on the Nettles 39-1. This results in about 40 barrels of oil per day. Net production is about 15 barrels per day. Prior to the workover, the well was only producing 10 barrels per day gross.
  • The company also reapired the gravel pack on the State Lease 18194. This well has produced 140 gross barrels per day over the past two-week peariod. Before the improvements, the well ony produced about 90 gross barrels of oil per day.

The company also said that it is continuing to review its operations and evaluate opportunities to improve production. In particular, the company is seeking opportunities that result in short payback periods like those above.

On the other side of the hand, the company is also focused on the reduction of operational and general and administrative expenses. In fact, YUMA said that it has “significantly curtailed its planned 2019 capital expenditures.”

Moving forward, the company said it will take further steps to mitigated limited liquidity. This can include the restructuring of existing debt, selling existing assets, reducing costs, seeking merger and acquisition opportunities and potentially raising funds from capital markets transactions.

The Big News

While the news above is positive, the following paragraph from the press release is likely a big reason that the short squeeze was triggered. It reads:

Discussions regarding the restructuring of the Company and its debt are ongoing, and management is hopeful that an accord can be reached. Management continues to work with Seaport Global Securities LLC, an investment banking firm, which advises the Company on its strategic alternatives and is engaged in various discussions regarding its debt, potential acquisitions and other initiatives generally considered part of the restructuring process.

Let’s face it, stronger production is great news. Reducing costs is great as well. But the real excitement comes from the potential sale of the company. At the end of the day, YUMA is a stock that has been hurting. With declining oil production, the short sellers have had the ammunition they needed to bring the stock down dramatically.

However, when a merger or acquisition takes place in the market, it generally comes with a strong premium, especially in cases like that with YUMA. As a result, investors started to jump on the bandwagon, sending the stock upward. As it climbed, the short sellers that have been dragging the stock down were forced out of their positions, only leading to further gains.

The Bottom Line

The bottom line here is a simple one, Yuma Energy has been hammered in the market as of late. However, with positive news, the stock is rocketing upward. There is no way of telling if a merger or acquisition will take place, but the prospect of one seems to be exciting investors.

Moreover, should an acquisition not take place, investors can take solace in the fact that the company is dilligently working to increase production, and therefore revenue, while decreasing expenses. It’s a delicate balance, and while the company did not provide any real numbers as to how much money they have driven costs down by, they say that they are making significant progress, painting a pretty picture for the future.

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