Approach Resources Inc. (NASDAQ:AREX) Hit By Unfavorable Market Conjuncture

[[tagnumber 0]][[tagnumber 1]]That oil prices have experienced a major downfall over the last few months and this downfall has adversely impacted a great many oil and gas companies is beyond question now. Approach Resources Inc. (NASDAQ:AREX), an independent Texan oil and gas enterprise, makes no exception, either. Just like many other competitors, AREX has suffered significant losses of revenue streams and these losses have spread over the charts, too. That is why, the question as to where the company is going next deserves some attention.[[tagnumber 2]] [[tagnumber 0]][[tagnumber 4]]As we write, AREX stock is traded at $2.18 per share, down 5.6% from yesterday‘s close. What is more important, however, is the fact that its present market value is precisely 88% away from the 52–week high of $18.55 reached less than a year ago and barely 17% above the 12–month low hit just two weeks ago. Given that the majority of analysts recommend AREX as a “Sell“ or a “Hold“ at best, one could safely assume that the downtrend might not come to an end just yet.[[tagnumber 2]] [[tagnumber 0]][[tagnumber 2]] [[tagnumber 0]]Looking at AREX‘s most recent 10–Q report, we see an almost 50% deterioration in revenue on a year–over–year basis, i.e $38 million in Q2 ‘15 vs. $74 million in Q2 ‘14, combined with a net loss of $12 million. By contrast, AREX closed Q2 ‘14 with a profit of $3.8 million. When it comes to the balance sheet, the picture is far from rosy, either. As it is, Approach Resources seems poised to face some liquidity problems in the short term since the company owes four times as much money to short–term lenders as it has yet to collect within the next 12 months or so. And even though management is expected to reduce its CAPEX to a minimum, this move alone seems unlikely to solve the impending liquidity crisis.[[tagnumber 2]] [[tagnumber 0]]While how long the period of declining oil prices will last is still anyone‘s guess, what is crystal clear at this stage is that a prolonged such period is very likely to have a fairly negative effect on the business as a whole. What is more, it might even undermine the value of the company‘s fixed assets which are currently evaluated at $1.4 billion.[[tagnumber 2]]