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Monday, November 23, 2020

PetroGas Co (OTCMKTS:PTCO) Old Habits Die Hard

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PetroGas Co (OTCMKTS:PTCO) is a former momentum play that occasionally pops back up on the scene as a somewhat less-than-reputable oil and gas play on the OTC. We called the top in this one the last time they were in full momo mode back in January of 2017. The strategy the company uses is to lease small plots of land in areas geographically near statistically productive oil assets and then claim that they have serious exposure as an oil producer. The main device the company uses is to call one of these temporary leases an “acquisition”.

The latest such example is the company’s announcement a few days ago claiming that it has “acquired” interests in oil and gas mineral rights in Terry County, Texas. Although we haven’t seen an 8K filing on this deal, we would assume that it is not in fact an outright land purchase but a lease deal. That has been the company’s modus operandi over time. And, with basically no cash reported on the books, one must assume this is a minor capital deployment rather than a major investment, as would be necessitated in a true land deal. We will watch out for an 8K detailing the deal, and would suggest interested market participants do the same.

PetroGas Co (OTCMKTS:PTCO) trumpets itself as a company that operates in the oil and gas industry. It has a total of 7 wells in Rogers and Burns leases covering an area of 714 acres located in Frio and Atascosa counties, Texas.

The company was formerly known as America Resources Exploration, Inc. and changed its name to PetroGas Company in January 2016. PetroGas Company was founded in 2014 and is based in Houston, Texas. PetroGas Company is a subsidiary of Rise Fast Limited.

According to company materials, “Petrogas Company, Inc. is an oil and gas exploration and production company focused on the acquisition of properties in areas with significant oil reserves and drilling potential. The Company’s growth strategy includes the acquisition of oil fields from distressed third parties at a substantial discount to value, and development of fields whose potential has not been fully maximized.”

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As noted above, PTCO has a clear track record of engaging in deals that present a scenario meant to suggest serious exposure to potentially major oil production opportunities. However, in the past, these deals have been misleading in a manner that has been unproductive for speculative traders as the company is actually leasing small plots near land that was once productive. The cash outlay in such situations has been on the order of a couple thousand bucks rather than the $100-250K deals one might expect.

Note, since we called this one out last year in January, shares have fallen – in split-adjusted terms – from $543/share down to $0.36/share, and represent one of the most dramatic implosions on the OTC over that period.

This most recent deal might be different. But we are skeptical and would suggest the reader be from Missouri (“show me”) with PTCO in the face of such announcements given its track record in the past.

Recent action has seen 92% piled on for shareholders of the listing during the trailing week, but that move comes in the context of a larger bearish trend. That said, PTCO has a track record that includes a number of dramatic bounces. Moreover, the company has registered increased average transaction volume recently, with the past month seeing above 1400% beyond what we have been seeing over the larger time frame.

This is particularly important due to the very limited float size in the stock (of 29M shares).

Earning a current market cap value of $41.8M, PTCO has virtually no cash on the books, which stands against about $350K in total liabilities. PTCO is pulling in insignificant trailing 12-month revenues (just $3K). You can bet we will update this one again as new information comes into view. Sign-up for continuing coverage on shares of $PTCO stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $PTCO, either long or short, and we have not been compensated for this article.

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