This Wednesday the public was flooded with information about Unitech Energy Resources Inc. (CVE:URX), (PINK:URXZF).
A series of agreements managed to stir the company stock yesterday. The announcement of the contracts, together with the release of the new financial reports, led to a jump of the shares on the TSX Venture Exchange (CVE). To this we must add the filing of the company’s annual oil and gas reserves report on SEDAR.
URX added two-thirds to its value, climbing from $0.03 to $0.05. The price is currently at its two-month high. Moreover, the stock enjoyed a remarkable demand by traders. Yesterday’s turnover of almost 4M shares exceeds 24 times the average and represents a trading record for the company on the CVE.
Unitech announced entering into a sub-farmout agreement with Batoche Resources Ltd. (BRL) as well as an investment agreement with BRL and Gregory J. Leia, on behalf of an initial group of investors. The farmout agreement obliges Unitech to drill and equip Well#1 in the Eagle Ford Zone in Texas.
The Eagle Ford Shale formation is considered to hold very large potential and to contain billions of barrels of recoverable oil. No wonder, a multitude of companies have been drilling in this highly prospective region.
The sub-farmout deal provides Unitech with the option to earn a 65% working interest in 5 576 acres in the Eagle Ford Zone by drilling a total of six wells. The company will also be entitled to 100% payback of its costs from the net cash proceeds.
This is, with no doubt, a great opportunity for Unitech to gain advantage over its competitors. In addition, the company intends to complete a non-brokered private placement of up to 300M units for gross proceeds of up to $15M. Under the terms of this Investment Agreement, Mr. Gregory Leia will replace Mr. Steve Price as a President of Unitech.
The further rise of the company’s shares is not guaranteed despite the positive news. Yesterday, Unitech filed its new financial reports too. They do not look that positive. The company reported declining revenues for 2010 in comparison with 2009, as well as a net loss of $0.7M for the past year.
Besides, the mentioned $15M financing will increase the stock dilution largely.
