We may find a proof of this statement almost everywhere, even on the stock markets. One of the many examples is Vecta Energy Corp. (CVE:VER), (PINK:VCTEF).
The company’s shares were inflated by a positive announcement released two days ago. However, the effect lasted only for a day. The next session, the stock rolled about 8% back on a turnover of almost 5M shares, which is nine times the average.
On Tuesday, Vecta announced to have signed a Joint Venture agreement with Texas company Vecta Oil & Gas, Ltd. to participate in an Exshaw/Bakken light oil resource play in Montana. As claimed in the release, this “positions Vecta as a key player among the leaders in the emerging Alberta Bakken play”.
In addition, the company informed about entering an engagement letter with Wellington West Capital Markets Inc. Pursuit to it, Vecta will issue a short form prospectus offering for gross proceeds of about $32M.
The funds are intended to be used for general purposes and for meeting commitments related to the mentioned joint venture agreement. Mar. 31 is planned to be the closing date of the offering.
The news was really good; however, the effect from its announcement was rather short-lived. Maybe, this is partially due to the company’s fundamentals, which are not as solid as they should be.
Not counting the fore-mentioned $32M financing, Vecta Energy reported a negative operating cash flow of $113K for the third quarter of 2010 and a working capital deficiency of $477K.
To this figures we should add that revenue from oil and gas operations fell by 81% in comparison with the relevant quarter in 2009. Even with the $32M financing, it is clear the company will need more cash to run its numerous properties in a proper way.
More hot information about Vectra Energy you can get from the latest company presentation for March, 2011.
