Gediminas Jasionis

Does Precision Petroleum (OTCBB: PPTO) Mean Easy Money for Investors?

by Gediminas Jasionis August 20, 2009
ppto_logo.jpgIf you have ever wondered do stock promotions really work, just look at Precision Petroleum (PPTO.ob or OTCBB: PPTO) - people are surely buying the story and trading this poorly supplied stock. The stock gained nearly 10% during Thurdays's trading session on a much heavier than normal volume. The fact that the stock was promoted was only disclosed on Wednesday, but unusual activity was witnessed from Tuesday.

The company is nothing special - just one of those low capital mineral properties exploration entities. The company started off in 2007 as Tidewater Resources and changed its name in October 2008. After the name change, the company actually started to file their reports with the SEC in a timely manner, I'll give them that. However, their financial performance didn't change much.

The stock was promoted after the company released updates on how they're doing in several wells in which they own an overriding royalty interest. Some oil and a bit of gas was recovered, but the very definition of overriding royalty interest defies the possibility of long term revenues from these properties. The company is actually targeting low risk opportunities, which tend to bring in little capital. Conclusion - the company is unlikely to become a blue chip.

From a fundamentals perspective, they have virtually no cash or similar resources ($1,316 in a bank account doesn't really count as a significant amount). Other assets such as participation deposits no longer directly belong to the company. Further, accumulated liabilities of $58,900 is more like an amount that you would pay for a very good car, but not enough on which to run an oil and gas mining business.

Here's what I think of this stock. If you buy it now, the promotional effect should be nearly ended, and you might get stuck with a bunch of shares you can't sell, unless with discount to market price. It's either buy it, hold it for several years and gamble your money, or forget about them until they really have something to show.

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At least the company has a neatly designed website

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