Wunderlich Says Emerald Oil Still A 'Sell,' Now Worth $4/Share

In a report published Wednesday, Wunderlich analysts maintained a Sell rating on

, while reducing the price target from $10 to $4, after the company shelved its acquisition and equity raise plans. Emerald Oil shelved its acquisition plans for entering the Delaware Basin as well as the equity issuance plans. In the report Wunderlich noted, "Obviously these moves have taken time, effort, and money away from what is left of the company's ongoing operations in the Williston Basin but we feel they also show the dire straits Emerald is in financially." The company has reverted to its previous production guidance focused on Willston Basin. "At these levels, production is expected to be on a steady state of decline from 2Q15 on due to limited activity as the company hunkers down and tries to survive the down cycle," the analysts mentioned. Although the cancelation of the equity deal is positive in the near term, the absence of any viable financing options in the future remains an area of concern. "The balance sheet remains constrained but at least the goal of cash flow neutrality is back on the table. The company has about $90 million in liquidity due to capacity on its credit facility but with redeterminations coming again in a few months, we worry if this liquidity position gets squeezed from both side," the analysts pointed out. "While free cash flow neutrality is now achievable again in the coming quarters, we worry the declining production and potentially lower liquidity, coupled with a seemingly closed equity window, could continue to illicit pain," the analysts added. The EPS estimate for FY15 has been reduced from $3.52 to $3.48.