The stock finished at $0.05, 25% above Friday’s level. The trading volume was large too and exceeded 1.73M. This beats eight times the average turnover of 206,884 shares. The most probable reason for the surge was company news issued on Monday. Here is what the release is all about.
Arrakis Oil Recovery LLC, a subsidiary of Imperial Petroleum Inc., Galena’s potential joint venture partner, announced some two weeks ago that Arrakis “has successfully completed commercial scale demonstration tests on oil sands from various locations”. The company intends to make a due diligence report with the help of an independent advisor.
Galena and Imperial Petroleum signed a letter of intent in February to begin the development of oil sand recovery operations this summer. The corporation’s directors will decide whether to move towards a definitive agreement.
Unfortunately, there are negative factors that probably speak in favor of a possible decline in the share price. Galena’s fundamentals are not very solid. Indeed, the company reported a working capital of $1.16M in the end of 2010. At the current cash spending rate, this should be sufficient for no more than one year.
The stock dilution makes a rather unpleasant impression. In 2010, it has risen by almost 109%. The recorded net loss for 2010 looks very huge too. It is not unusual for a company in the exploration stage to incur losses. Yet, a negative net income of $4.575M seems a bit exorbitant and worrying to me.
A large part of the loss derives from a write-down of properties and equipment. This is not a positive sign either.
Nevertheless, Galena is not at all in a troublesome situation. What is more, the corporation is expanding. In early March, the company purchased a 23% working interest in the Texas State Blocks at Matagorda Bay.
