Riding a wave of paid promotions, Calgary-based Bulletin Board stock Cougar Oil & Gas Canada Inc. (OTC:BB: COUGF, Stock Forum) has seen its stock price triple in the last four months.
The recent jump to a 52-week high of $5.24 on January 5 from $1.25 in October 15, is great news for a group of European investment funds who picked up cheap stock for only pennies a share last year when Cougar Oil (formerly known as Ore-More Resources) merged with Cougar Energy Inc. in a reverse acquisition deal.
(More about that cheap stock later)
But more recent trading action has been less welcome for investors who bought the stock just prior to its recent slide to $3.43 on Wednesday. They now face the very real risk that the stock will continue to sag, especially if the paid promotion campaign winds down.
The product of recent amalgamation of Cougar Energy Inc. and Ore-More Resources Inc., Cougar Oil & Gas Canada has a market cap of $278 million, 62 million shares outstanding and oil production of about 320 barrels per day from its flagship Trout Area operations in north central Alberta.
Its biggest single shareholder is Kodiak Energy Inc., (OTC:BB, KDKN, Stock Forum), a money losing oil and gas firm, which holds a 62% interest in Cougar Oil. Kodiak closed at 25 cents on January 26.
When asked to comment on the stock’s recent rise, Cougar Oil’s 60-year-old chief executive officer William Tighe attributed the move to “a lot of buying in Europe.’’
“We are a growing company” he said, during a telephone interview with Stockhouse.
Tighe said he owns about 10 per cent of the company, making him a key beneficiary of a stock market rally, which has coincided with a costly paid promotion campaign.
The most aggressive has been John Person’s Bottom Lines Newsletter, which promised a “tidal wave of profits,” and predicted that Cougar Oil has the potential to deliver a 516% gain,
“Over the next 24 months, I see the stock flying into the $15….$17….$19 neighbourhood, turning a modest $5,000 investment into a $67,849,” the newsletter said.
According to the fine print, an entity called Toprank Marketing paid $300,000 for the advertisement. John Person was also paid $7,500 to assemble information about the company – a point that has not been independently verified, the newsletter has disclosed.
“That’s a lot of money, but I don’t know where they got it from,’’ said Tighe, when asked if he knew who financed the John Person’s campaign.
Tighe also said he didn’t know who retained Morgarten Financial Services, a so-called third party, which agreed to pay SISM Research of Zurich Switzerland $1,850 per month over a two-year period to ensure “independent coverage.”
In an update published on January 24, SISM said it was raising its target price for the stock to $10.50 from the previous $7.25 target.
However, in the footnotes, SISM said it does not guarantee the accuracy of the information in its report.
And in spite of the new stock price target, SISM said its report does not represent a solicitation to buy the securities.
Aside from SISM and John Person’s Bottom Lines, Cougar has also been featured regularly in BestofOTC.com, which is compensated by companies featured on its site, a practice which causes a conflict of interest, BestofOTC.com said.
What these reports don’t say is that Cougar had only $1,804 in cash at the close of the fiscal year ended of July 31, 2010, when it posted a net loss of $3.2 million, or 6 cents a share on operating revenue of $2.6 million.
As foreign issuer rules do not require the junior to report any more financial results until the end of June 2011, the company’s performance in more recent months will remain a mystery until they are released.
Speaking to Stockhouse, Tighe said the company is generating gross monthly revenue of about $400,000 and plans to spend $13 million this year on exploration and drilling.
Cheap Stock
Still, if any of these bold forecasts prove to be accurate, it would be especially good news for a number of vendors who picked up cheap stock and warrants as part of the reverse acquisition of Ore-More Resources by Cougar Energy Inc. (CEI) back in January 2010.
According to regulatory filings, the vendors are a group of European investment firms, including Zentrum Energie Trust AG, CAT Brokerage AG, LB (Swiss) Private Bank, Mauschen Finanz Inc., and Rahn and Bodmer.
In return for tendering warrants to purchase 884,616 shares in CEI by December 4, 2011, the vendors received 3.9 million common shares, plus an equal number of warrants, entitling the holders to exercise 5.3 million warrants that are exercisable at prices ranging from 0.2888 to 0.5777 cents per common share.
The expiry dates for the warrants range from March 4th, 2011, to December 4th, 2011.
Meanwhile the surge in Kodiak’s share has been noticed by Stockhouse Bullboard posters.
Poster Bmcginnes said that in his view the stock is way too expensive based on the company’s current production. “I would wait for a pull back to the $2 range.’’
“For instance there are companies producing over 20,000 barrels of oil per day that are trading at plus or minus $6 and Cougar is hoping for 2,000 barrels per day in 2011,’’ he said. “So the spec part of this baby is played out.’’
Keith Schaefer on Oil Juniors
Below are three Alberta oil and gas plays which have been mentioned by regular Stockhouse Contributor and newsletter writer Keith Schaefer.
- Arcan Resources Ltd., (TSX: V.ARN, Stock Forum), which closed at $5.59 on Wednesday, and trades in a 52-week range of $5.92 and $1.69, had record production of 2,740 barrels of oil per day for the three months ended September 30, 2010.
- Second Wave Petroleum Inc. (TSX: T.SCS, Stock Forum), which traded at $2.59 on Tuesday, has an oil discovery in West Alberta and has previously been tipped as a potential takeover candidate by Schaefer.
- Coastal Energy Co. (TSX: V.CEN, Stock Forum), is producing 12,500 barrels of oil per day, mainly from offshore operations in Thailand in the third quarter ended September 30, 2010, an increase of it is rocketing to production from 10,000 barrels per day to possibly 18,000 barrels in just six months (speculative buy). It closed at $7.11 on Tuesday. Canaccord had a buy rating on the stock speculative buy rating on the stock last year.