Pegasi Energy Resources Corp (OTC:PGSI) keeps the way down these days. The stock started going down a couple of days ago, and yesterday it lost the next 4% of its price on an increasing traded volume. The question, is what is the reason for the fall?
On June 20, Pegasi reported excellent results from an initial swab test on the new well in Texas and promised an enhanced stock value, however, there was another statement in the announcement. Along with the optimistic claims, Mr. Michael Neufeld, President and CEO of Pegasi, said that the company continue to search for partnerships and capital to properly exploit its resources. Does it mean that PGSI needs additional financing for its projects?
Most probably, just this statement made traders give a thought on the company’s future and carefully consider their investments.
Pegasi Energy Resources Corp. is an East Texas based oil and gas exploration and production company. Last month, the company announced oil and gas reserves of 91.4 million barrels of oil equivalent in all categories until December 31, 2010. However, the good news couldn’t support PGSI stock price at that time. Looks like currently the situation is the same.
In the meantime, the financial report of Pegasi appears to be quite contradictory. Despite all encouraging statements, the company’s current assets are about $1.4 million, while its current liabilities exceed $12 million. At the same time, as of end-March the accumulated deficit of PGSI jumped over $10 million, excluding the overdraft and long-term liabilities.
Despite these bad numbers, Pegasi claims that its capital will be sufficient to finance its operations for this year. However, any future acquisitions and exploration, as well as administrative requirements (such as salaries, insurance expenses, general overhead expenses, legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow.
