If you bought on Friday I believe your timing will prove to be quite impeccable.
Some thoughts on valuation. The company has negative cash flow right now so you can't use that metric at this point. One reason that they are in a negative cash flow situation is that they financed the initial 8 wells they drilled, plus the building of their pipeline and oil processing facility, by granting a 4 million barrel production payment to their partner.
This means that they now have to hand over 4 million barrels of oil to their partner without any current revenue even though they are sharing in the lifting costs of those barrels. So this greatly distorts the income statements of the company. I'm a bit surprised their accountants didn't require them to capitalize the costs all up front and then credit some liability account called "Production Payment Liability", and then have this liability account get drawn down as they delivered the barrels.
But instead of the above accounting they didn't make any entry when the money got spent, and now the income statement gets whacked each quarter. I expect that this will all end sometime during '04, which is when they should have delivered their 4 millionth barrel under this arrangement.
The better way to approach the valuation of this company is by valuing its amount of proven reserves. The company has 40 million barrels proved up and in Russia the value of a barrel of oil in the ground is worth between a buck & and a buck & a half. So the company should have a market cap of, say, $50 million.
The week that just passed was truly historic, record volume for a week for TTPT I would be willing to bet. Some big money is flowing into this stock at this point and there is not all that much float to absorb it. Most of the stock out there is in the hands of long-term holders, of the, shall we say, greedy orientation, who are not holding for a lousy 20% gain.
The fact that the stock is consolidating its gains here at the $.40 mark bodes well for establishing a strong base from which to begin the assault on the $.50 barrier. In the past whenever this stock has penetrated this barrier it was soon slammed back down under it. I believe a big reason for this is that it did not have a solid base from which it began the rally over that mark.
The key thing here is that the company needs to get the stock price up so that when it does its next financing it will not have to dilute out everybody like it did earlier this year. This financing will not have to be for as much $$$ as the last -- I believe all they will need is a coupla million $. That should be enough for them to finance their operating deficits and to drill those 3 wells they plan for 1Q '03. Once they drill those wells, the company should then be in a positive cash flow situation, which should allow them to then approach someone like the Organization of Petroleum Importing Countries (OPIC) for a loan to finance further development of their field.
The more I think about the trading action last week the more I believe the stock is about to break out to the upside. As the saying goes, volume usually preceeds price movement. This is particularly true for the penny stocks.
I'm even doing stuff that I don't normally do, which is to hype TTPT on other boards, viz.:
post.messages.yahoo.com
(Voluntary Disclosure: Position- Long; ST Rating- Strong Buy; LT Rating- Strong Buy) |
