Borislav Tonev

Petro River Oil Corp (OTCBB:PTRC) Jumps On Record Volume

by Borislav Tonev July 2, 2013
PTRC.pngMore than 1million shares of Petro River Oil Corp (OTCBB:PTRC, PTRC message board) common stock changed hands during yesterday's trading session. That's more than ten times the average volume for the last three months but, more importantly it pushed the ticker up by over 35% and it finished the day at $0.50 which is pretty close to the 52-week high. So, is there a reason to get excited?

PTRC have not had it easy in the past few years. Due to failure to file some important financial information, they have had two seize trade orders from the Alberta and British Columbia Securities Commissions and the restrictions meant that they are unable to generate enough capital to fund their operations. The documentation was sorted in March and shortly after the orders were lifted, people started to get interested in them.

Simultaneously with the removal of the restrictions, PTRC changed their name to Petro River Oil Corp. which served as proof that the acquisition of the then privately-held Petro River Oil, LLC really is going to happen. Naturally enough, trading volumes shifted a little bit and the ticker started to lift off from the region of $0.10 - $0.15 that it had occupied until then. By mid-April it was quite close to the $0.50 per share mark and for a brief moment it hit its 52-week high of $0.52 but then, just when everyone was expecting that the ticker will erupt upon the definitive agreement with Petro River Oil, LLC (which came out on April 23), it started to sliding down. May was pretty poor in terms of stock performance and by second week of June, PTRC were standing around $0.20 per share.

Then, for reasons that are not immediately obvious, the ticker sprung back to life and it hasn't recorded a red session since June 20. The question now, of course, is: "Will it manage to cling on to the relatively high price?".

86NHUR.pngWell, if our predictions were to be based on the recent performance of similar companies in Pennyland, we would have had quite a lot of reasons to be worried. Take Northumberland Resources Inc (OTCMKTS:NHUR) for example. As you can see, PTRC's chart is starting to look remarkably similar to the one NHUR has presented us with and you can see that there were two spikes followed by some quite disturbing drops which means that right now NHUR is around 50% below the height of $1.68 that it reached during May. That said, there was a $3 million promotional effort for Northumberland - something that PTRC have managed to avoid so far.

This doesn't mean that continuous growth is guaranteed, however. When the acquisition of the privately-held Petro Oil was completed, PTRC got quite a lot of land in the Southeast Kansas area of the Mississippi Lime play and they do say that they now have 50% working interest as well as 40% revenue interest in no less than five producing wells. Estimating the chances of PTRC's success, however, is still difficult.

The problem lies with the fact that we don't have a current picture of their financial situation. When the 8-K announcing the definitive agreement was published, it said that the audited balance sheet of the new subsidiary will be filed in an amendment which is yet to see the light of day. We can see from PTRC's latest 10-Q for the period before January 31 that prior to the acquisition they were struggling and this means that their future is pretty much dependent on the assets and capital brought in by the new subsidiary. A thing that might make shareholders sleep easier at night is the fact that around $20 million worth of debt was extinguished when the acquisition was completed, but it was done through the issuance of quite a lot of stock.

With many people and entities holding large stakes of PTRC, the chances of someone releasing their shares on the open market is getting bigger and bigger. Especially when you have in mind the uncertain future. At $0.50 per share, the ticker could also be a prime target for a paid promotion and Italk Inc (OTCBB:TALK) (who slumped by a further 30% yesterday) showed us how disastrous an effect this could have on the ticker. That's why, we reckon that evaluating all the risks related to a potential PTRC investment is crucial before making your final decisions.

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