On Monday Eco (Atlantic) Oil & Gas Ltd (CVE:EOG) regained 13.1% from the previous drop, but the huge volatility in price remains and thus the fundamental reasoning might still be challenged.
The trading volume dropped sustainably thus showing there were limited short squeezes on this price run. Profit taking was the most likely cause Friday’s depreciation and the price has now established somewhat of a support at 81 cents per share.
On Thursday, March 8, Eco gained value after releasing news on resource estimates for Blocks “2213A” and “2213B” on their Namibian property. The best estimate concluded this property could hold a total of 7.79 billion barrels of oil. Under the current price it calculates to a potential $836.8 million in gross revenue for oil sold.
The company’s current market cap of $57.3 million clearly underestimates this potential. However, the essays carried out are basically only speculations at the moment and no real value will created short term.
This leaves plenty of space for market price changes and it could even fall back down to the previous channel of 50 to 65 cents per share. There is no assurance the buying pressure will be sustainable seeing how the recent profit taking affected the stock.
On the other hand, the company is currently in a stable financial financial position. Their cash reserve is $1.9 million and liabilities are comparatively small $111 thousand. They can carry out more exploration activities with ease and expand on the most recent findings, but it will take time. There is no telling when the property’s potential will get fully realized, thus the bearish approach to this stock looks most appropriate at the time.
