Cardinal Energy Group Inc (OTCBB:CEGX) Gets Chopped in Half
A little over a month ago, Cardinal Energy Group Inc (OTCBB:CEGX) was traded for well over $0.20 per share. Right now, it’s sitting at a hair over $0.04. Yesterday’s session was particularly painful. In a matter of just six and a half hours, the ticker managed to wipe out more than half of its value and it did it on a record-breaking volume of nearly 4 million shares. So, what went wrong? Unfortunately, that’s a tricky question.
The news, for one, has been good. Last week, CEGX updated their shareholders on what they’ve been doing on their Bradford A & B leases and they said that they’ve logged a 30% to 50% initial increase in oil production. We haven’t seen any SEC filings that could push the ticker down and the pumpers have been keeping their distance for well over a year.
All in all, CEGX‘s appalling performance over the last few weeks is not really easy to explain. And this means that there will be plenty of people who will be waiting for a bounce. Some will even be hoping for a longer-term recovery. But can it happen?
A bounce after such a horrific crash is definitely not out of the question. Then again, penny stocks are not known for following technical indicators which means that you should probably tread carefully. As for a more sustainable climb, things look even shakier.
Seeing a 30% to 50% increase in oil production is good, but it might not be enough to solve all of CEGX‘s problems. And there are quite a lot of them. The latest financial statement, for example, looks like this:
- cash: $59 thousand
- current assets: $688 thousand
- current liabilities: $6.9 million
- quarterly revenues: $40 thousand
- quarterly net loss: $1.46 million
Unlike the majority of its OTC counterparts, CEGX is an oil and gas company that is actually producing and selling oil and gas. Unfortunately, your local gas station is probably generating more revenues and its losses (if any) are most likely much more manageable. To top it all off, CEGX also has picked up quite a lot of debt over the years and the way they have reported it in the 10-Q suggests that the management team aren’t too proud of this fact.
At one point, for example, they say that there are notes with a principal amount of $3,225,000 which are secured by “a number of shares of restricted Stock (the “Stock Coverage”) whose value based on the bid price of the Stock is twice (or 200%) the amount in outstanding and unpaid principal and interest of the Notes”.
This, in case you haven’t figured it out yet, is just a confusing way of saying that the notes in question are convertible into shares at a 50% discount.
