Gediminas Jasionis
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Reef Resources Ltd (CVE:REE) Exploration Update Pushes Share Price to a New 52-week High

by Gediminas Jasionis Apr 14, 2011
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8ree_chart.pngReef Resources Ltd (CVE:REE) force pushed up more than 64% after the company announced satisfactory drilling results for its oil and gas property.

Petrophysical analysis done on the Ausable #5 well, on Guelph and A2 formations in Ontario, showed 72 meters net pay of oil and natural gas. Further hole and flow tests will be performed on the well and comprehensive core analysis is planned for the near future before the Ausable #5 well can be put on production.

Stock price shot up drastically after the announcement, though most of the action took place in over the first half an hour following the news and possibly gaining further momentum from short squeezes.

0reed_logo.jpgShare price was stale for the rest of the day. Another jump in price could happen because of overnight order accumulation. Profit taking had little effect on the share price yesterday as the sales were successfully absorbed by new traders coming into play.

Reef is financially fragile with only $338 thousand reported in liquid capital at the beginning of 2011. The company will likely continue to raise cash the same way they used to do it up till now - by selling debt instruments. However, if they want to ramp up their exploration efforts and eventually go into production they will need to scale up the borrowing. Market cap growth is likely to be limited by the fear of large scale changes to the balance sheet structure by ramped up debt.

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