Alange Energy Corp. (CVE:ALE) (PINK:ALNGF) dropped more than 36% on Thursday after the company revised its financial figures for the third quarter, disclosed 4th quarter production and appointed a new COO.That was a significant amount of changes for just one day and the reaction from traders points out it was not received very well. But are things really that bad?
Apparently, the company had produced an average of 2.5 thousand barrels of oil equivalent per day during the third quarter of 2010, rather not the previously disclosed 3.2 thousand. That is nearly 22% less production than previously thought. Exit rate production was cut down by a similar amount to 2.6 thousand and daily production rate was nearly halved from 4.3 thousand to only 2.6 thousand boe/d.
Previously disclosed numbers were of scale, because apparently they were related to the production capacity rather than to the actual production which was lower because of various extraordinary factors like seasonal weather. Average daily production went down nearly 8% in the fourth quarter and exit rate went down 10%.
The company reported decrease in the cash reserves, but also reported a significant 42% drop in current and long-term debt. The management is looking to adjust the previously provided financial guidance as well.[BANNER]
The changes in the financial data obviously decreased the market value of the company, however, the current market cap of $243 million is barely in line with the recorded net tangible worth of Alange, which was around $250 million at the end of the third quarter. Even with constant losses and continued borrowings to cover them, the stock valuation looks too low.
Increase in selling pressure was partially induced by panic on the bad news. This means the price could retrace back up, or at least stabilize and consolidate until the management publishes further updates.
The company has also announced an appointment of Gregg Vernon as its new interim Chief Operating Officer. He will be dealing with implementation of changes to the internal controls and procedures of Alange, which should ensure improved production reporting and allow avoiding large discrepancies in the future.
