Infinity Energy Resources Inc. (OTCMKTS:IFNY) Gets Squashed

Infinity Energy Resources Inc. (OTCMKTS:IFNY)’s management team announced earlier today that they are going to conduct an update conference call next Monday and it’s fair to say that they will have quite a lot of explaining to do. As you can see from the chart on the right, in terms of stock performance at least, IFNY were doing relatively well (for an OTC company). Investors were quite excited about the offshore oil wells located near Nicaragua and were looking forward to the start of the drilling operations. People were even more enthusiastic about the fact that IFNY‘s wells are immediately adjacent to properties owned by Noble Energy, Inc. (NYSE:NBL) – a company with a $26 billion market cap, quarterly revenues of more than $1.3 billion and a net income of around $204 million.

It was a common conception that if Noble are sure there is oil to be pumped from those wells, then this must be the case. Unfortunately, sometimes things don’t go quite according to plan even for the big boys.

NBL issued a press release about an hour before yesterday’s opening bell saying that they have tried to drill into the offshore Nicaraguan wells, but failed to find any oil in it. The holes are going to be plugged and the rigging equipment will be moved to other sites that will, hopefully, lead to discovery.

For NBL, who have plenty of properties already generating billions of dollars in revenues, this isn’t such a big deal. In fact, investors barely reacted to the bad news and the stock finished the day 0.42% above its previous value.

Over at IFNY‘s camp, however, things were a little bit different. NBL‘s press release triggered what can only be described as a panic attack. IFNY opened the session at $2.15 (24% below Tuesday’s close) and started sliding immediately. Six and a half hours later, it was sitting at $1.33 meaning that the daily losses amount to no less than 53%. A total of 1.9 million shares worth a mind-boggling $2.45 million changed hands making IFNY one of the most heavily traded OTC stocks yesterday.

Early trading today shows no signs of a bounce. While the selling is not quite as dramatic, the ticker is a further 6% below its previous value and we’re seeing very little movement in the right direction. So, what about the future?

Some people think that, however small it is, there is still light at the end of the tunnel. IFNY announced on Tuesday that they have engaged a geoscience company that is going to do some mapping on the territories and give more details. The more loyal shareholders around message boards are still hoping that, despite all odds, IFNY will be able to make a discovery. Chances are slim, but there is always a slight possibility. There is another problem though.

IFNY published the Q3 results on November 5 and it’s fair to say that with a balance sheet as dreadful as this, they won’t be able to pump even a drop of oil from the bottom of the ocean. Here’s a summary of the most important figures:

• cash: $143
• current assets: $29 thousand
• current liabilities: $5.1million

The uncertainty around the existence of oil in IFNY‘s wells means that few people will be happy to invest or lend them money which reduces the chances of success even further.

At the moment, the stock remains nothing more than a speculative play. It might be able to bounce in the coming days, but if the management team fails to come up with a Plan B, it could all go back down really soon. Be sure to weigh the risks carefully before putting any money on the line.