Near Term Buy On Oil
I first wrote about Aroway Energy (ARW-V) in September when the stock was $.32 a share. The stock was $.64 a week ago before sinking to $.56 on Friday last.
I was talking to Chris Cooper on Friday and he mentioned warrants expiring on Dec 22, 2011. Aroway did a financing just short of a year ago and issued 4.1 million flow-through shares with a half warrant at $.50 and 2.09 million non-flow-through shares with a half warrant at $.45. With the recent rapid rise in shares to $.66 all of the warrants came into the money.
So while most resource shares have declined for the year and are being sold off now because of tax loss selling, Aroway doesn't have any tax loss selling. All of the shareholders were in the money. But the holders of the warrants may need to sell the shares to pay for the warrants. That situation will end on December 22 and the shares should go a lot higher.
Aroway has been a light in the darkness for investors this year. President Chris Cooper said a year ago that he wanted to end the year at 600 BOE and he beat that by 10% at 669 BOE.
Aroway is in the midst of an aggressive winter drill program with three wells scheduled for completion before the end of December. The company is hoping for an announcement by late January as to the status of the well completion and testing. Aroway is targeting the Winterburn formation with a 1000-meter deep vertical hole and a 2000-meter horizontal leg. Success in this hole would open a number of follow up locations for more drilling.
As I said in my September piece, a BOE of production in the Peace River area is valued at $85,000. In "theory" with 51.4 million shares outstanding today the company would be around fair valuation at $1.14 per share. Obviously people exercising warrants will increase the number of shares outstanding but if all warrants are exercised, the company will bring in an additional $6.25 million in cash. Chris Cooper has done a brilliant job of putting cash to work profitably for shareholders. I expect both the BOE produced to be a lot higher in a year along with the share price.
It's rather pleasant to hold one stock that has actually gone up this year.
In short, sellers are hitting Aroway only because they want to exercise their warrants. It's all artificial. That period will end on the 22nd of December with clear sailing ahead.
Aroway is an advertiser, we own shares and we are biased. As always, we don't share in your profit or your losses so you alone are responsible for your own due diligence.ArowayEnergy
ARW-V $.56 (Dec 19, 2011)
ARWJF-PK 51.4 million shares
Aroway Energy website
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