Martin Tsvetkov

Lighthouse Petroleum Inc (PINK:LHPT) Gains 92% on LOI News

by Martin Tsvetkov May 12, 2011
LHPT_chart.pngAfter the three-month period of silence, Lighthouse Petroleum Inc (PINK:LHPT) finally addressed its stockholders yesterday. Thanks to the press release, LHPT stock got off to a flying start of the trading session that took place on the same day.

So, what happened yesterday? In brief, LHPT went through the roof. Delivering its best performance for the last two years, LHPT stock gained a staggering 92% in value, rallying very close to its early-April level of $0.0023 per share. In terms of volume, however, the company's stock hit a 52-week high, shifting more than 93.4 million shares, head and shoulders above the daily average trading volume of 6.14 million.

What defies all logic here is that the huge jump of LHPT might actually be attributed to ... a LOI. Which is quite surprising, given that signing a Letter of Intent does not bear any resemblance whatsoever to signing a definitive agreement. Nevertheless, investors have chosen to take a positive outcome for granted given the huge trading activity around LHPT. In addition, the prospect of acquiring a Texas-based 5120-acre property and drilling wells on it for a five-year period sounds like a commercially viable undertaking.

As suggested by its name, Lighthouse Petroleum Inc occupies the crude petroleum and natural gas industry. Moreover, its main focus of interest boils down to the identification, evaluation, as well as the subsequent acquisition of both Texan and Wyomingite properties that are considered to be rich in natural gas and crude oil. Incorporated in 1990, LHPT has its headquarters in Dallas, TX.

Being a regular information provider, LHPT has diligently filed its financial reports using an alternative reporting standard. It recently published a full 2010 annual report. As of Dec. 31, 2010, the company had:

  • $1 in cash and current assets;
  • $165K in current liabilities;
  • $443 thousand in long-term liabilities;
  • zero revenue and an annual net loss in excess of $2.3 million.

LHPT_logo.jpgThe unenviable financial situation of LHPT raises concerns about its future operations. Most probably, it will not be able to provide enough cash to transform the above mentioned LOI into a done deal. Instead, the company is extremely likely to resort to dilution as there is huge room for it. At present, the company has only issued 305 million shares, which is a drop in the bucket as compared to its 10 billion shares of authorized LHPT stock.

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