Dragni Dragnev

Royale Energy, Inc. (OTCMKTS:ROYL) Explodes On Merger Announcement

by Dragni Dragnev July 26, 2016

Royale Energy, Inc. (OTCMKTS:ROYL, ROYL message board) had been stuck in obscurity in the last three months or so, but now it is back in the investors' radar with an exciting announcement.

As per the company's latest announcement, it has signed a letter of intent with Matrix Oil Corp. for the merger of both entities into one, with Matrix effectively becoming ROYL's wholly owned subsidiary forcing ROYL's to assume Matrix's $12 million debt.

As per the announcement, it seems like ROYL is planning to pay for the acquisition in convertible notes “with a par redemption value of $10.00 per share” - which is more reassuring than any similar agreement you'd usually find on the OTC Markets.

Then again, in its announcement, ROYL did stress on the company's aspiration to meet requirements necessary for its re-up-listing on the NASDAQ.

Truth be told, as it is now, it doesn't look like the company is ready to do so. While it is a fact that its achievements to date effortlessly outmatch those of most companies in the same tier of the OTC Markets, one look at its financials gives the impression that it is not exactly NASDAQ material yet:

  • Cash - $2.5 million
  • Total Current Assets – $3.2 million
  • Total Current Liabilities – $10.4 million
  • Quarterly Revenues - $287 thousand
  • Quarterly Net Loss - $624 thousand

Will that state of developments change once the merger is a fact? Only time will tell – and if the company's announcements are to be believed, the companies will seek to complete the merger in the fourth quarter of 2016.

Overall, ROYL regaining the investors' attention and favor seems to have been well deserved. Even after its most recent jump, its market cap is about $12 million – which is low for a company that actually has some assets under its belt and revenues on the way. However, investors would do well to not get too caught up in the rush of hype, because as it is, everything that ROYL claims to have planned is still quite far from becoming a reality. We are talking about a LOI, after all. 

Although it certainly appears that ROYL is a more solid company than the dubious underachievers that populate a large part of the OTC Markets, diligence and a healthy dose of skepticism is in order when dealing with it as well.

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