Nikolay Tomov
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Desmarais Energy Corporation Stock (CVE:DES) Needs Promoter's Help to Renegerate

by Nikolay Tomov Mar 31, 2011
"We need some advertising to boost the stock", managers of Desmarais Energy Corporation said to themselves. They hurried to make their words a reality. Yesterday, for the humble compensation of $17K, the shares (CVE:DES) were promoted by

Desmarais_-Chart_new.pngFor now, the advertising efforts seem to have no positive effect. Just the opposite. Yesterday, when the promotion was made, DES slipped by 6% on the Canadian Exchange (CVE) on an almost unnoticeable turnover of 500 shares.

The low trading volume is one of the weaknesses of the stock. The average turnover for the last 30 days is only 22K. Sessions, in which the volume is below 1 000 shares, are not rare occasions too.

As it seems, the stock is illiquid and not very attractive to investors. That is why it is in little demand by traders on the market. For this reason, some efforts had to be taken in order to regenerate the shares. The company's directors decided to use the services of a promoter for the task. Perhaps, the several coming days will show whether the advertising will have a positive effect, at least on the short-term.

It is worth noting that the latest stock promoted by was that of Sphere Resources Inc. (SPHUF). The advertising efforts there were successful, but in the short run only. Within two days, the shares gained 57%, then they began falling again.

In fact, this is what happens with most promotions. In the case of Desmarais, we are still waiting to see the short-term positive effects of advertising. In addition to this negative part of the story, we should mention the company's financials, which look far from solid:
  • As at Sep. 30, 2010, Desmarais reported a working capital deficiency of $4.8M;
  • Desmarais reported only $476K in cash at the end of last September. As stated in the statements, there was even a deficiency of $39,570 in the company's operating bank account.
Desmarais_-Logo_new.pngNow, it is time to tell the positive facts about Desmarais Energy. The company reports revenue from petroleum and natural gas sales. The earnings are not large, but are still earnings, after all.

Last, but not least: in a release from yesterday Desmarais announced its year-end reserve evaluation, compliant with National Instrument 51-101 standards. The report shows positive results: compared to the end of 2009, proven reserves have risen by 40%, to reach 169K barrels of oil equivalent as of Dec. 31, 2010.

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