The best word to describe the recent development of Sky Petroleum,Inc(OTC:SKPI) on the market is no doubt volatility. Even though since the beginning of this year the price has been advancing slowly but steadily, it is yet to see whether the trend will remain for the weeks to come.
It was actually the same during the whole 2010. After hitting $0.9 per share last September, a sharp decline began which did not end until some positive announcements were released by Sky Petroleum in December. Among them worth-mentioning is the one from Dec. 2, stating that the company has received official ratification and approval by the Albain Government for exploration and extraction of gas in three exploration blocks in the country. According to the terms of the agreement, the company is entitled to a seven-year term with three exploration periods. Eventually, upon discovery of gas it allows a development and production period of 25 years. According to a study developed by Sky Petroleum and McKinsey&Company, the three blocks have potential market value of between $1 billion to $3 billion based on expected reserves.
Such positive news is hard to ignore, although one would expect much more intense activity by traders. Though that did not take place and the daily trading volumes remained the same. One reason for this might be that more than a month after the first announcement there are no updates on any developments of Sky Petroleum in Eastern Europe. Discussions are already mounting in forums on the Internet, as investors are wondering what is the present situation with the company`s planned operations in Albania.
In the past, through a subsidiary Sky Petroleum was entitled to a share of the production revenue from the drilling operations in the United Arab Emirates. This agreement came to an end in 2009, which is the main reason why investors are hoping that things would go smoothly in Albania in 2011. In fact, it is essential for the company that this project turns up well. According to the latest 10-Q covering the first three quarters of 2010, a net loss of $911 thousand was accounted. With total current assets of $3.8 million and a ten times greater accumulated deficit, it is not only a matter of profits but also a matter of future existence for the company that this project is successful.
