The stock of ShaMaran Petroleum Corp. (CVE:SNM), (PINK:SHASF) got excited by the announced on Wednesday “major oil discovery” on one of the company’s properties in Kurdistan. Yesterday, on the TSX Venture Exchange (CVE), the shares’ turnover reached seven times the average trading volume.
SNM took the first place for being the most demanded item on the Canadian market. In terms of price, driven by the great news, the stock opened the session with a gap up, starting at $1.08. This was, however, the price-high for the day too. During the trading, the shares slipped a bit, as the sellers took advantage over the buyers. As a result, SNM finished at $0.97, which was still 11.5% higher than the previous day-close.
On Wednesday, ShaMaran informed the public about a huge oil discovery in the recently drilled Atrush-1 exploration well in Kurdistan. The company claims that excellent flow rates have been encountered, totaling over 6 393 bopd from three Jurassic horizons on the block.As expected, the announcement caught investors’ attention and hence the volume spike and the witnessed price-gap. It seems, though, that the initial enthusiasm is already fading away. This is proved by the black candle that was formed yesterday on the chart.
Positive events that could help the further rise of the shares:
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The company’s stable financial condition is illustrated with a working capital of almost $41.4M and $58.7M in cash and equivalents;
- Drilling of the Pulkhana-9 well at Pulkhana deposit in Kurdistan commenced in early April;
Negative factors, which might probably influence negatively the progress of the stock:
- ShaMaran has no revenue and recorded a net loss of $1M for 2010;
- High levels of stock dilution. The average number of outstanding shares has increased from 346.6M in 2009 to 536.2M in 2010, this is a jump of 55%.
- ShaMaran has declared significant oil resource estimates. However, as the company admits, “there is no certainty it will be commercially viable to produce any portion of the resources”.
In view of all this, investors should be careful when deciding what kind of position to take – long or short in regard of the trading with ShaMaran shares.
