PERC: PLAY COULD BE OVER!

One of the amazing feats during the recent run up has been the rush of adrenalin by Petroenergy Resources . The small company has a market capital presently of about P 1.9 billion (as of May 19^th) which jumped from only about P 500 million in the 22 sessions past. It has been the only oil revenue generating publicly listed exploration company in the Phisix. While other oil exploration companies have sizeable contract rights over prospective domestic oil fields, PERC’s revenues emanates from its partnership with Vaalco Energy Inc., at a large prolific offshore project site in Gabon, West Africa.

PERC’s story is practically an embodiment of the quintessential investing mindset of local investors; with a knack of speculations and devoid of fundamentals.

Since its peak during the initial run, prompted by a dividend play, sometime middle of last year, PERC’s share prices remained stuck in inertia, even despite its pronouncements that it had doubled its earnings as early as the third quarter! Investors were basically unmoved by such an earnings surprise!

Further, its operating partner Vaalco Energy declared a 28% rise in diluted earnings for 2005 as early as March 9^th of this year, yet the market appeared to have ignored such pleasant positive unexpected news while PERC’s share prices continued to languish even as its oil peers Oriental Petroleum and Philippine Overseas made substantial advances due to a bullish general sentiment...until of course, April 18^th.

PERC: Technically still overbought

On the 19^th of April, PERC’s prices suddenly caught fire and trailblazed upwards for about 22 days until Friday May 19^th where it closed at 16.75.

The move caught me by surprise since it leapt from about P 4 to over P 19 with apparently no logical explanation for such stellar performance.

I had initially thought of another dividend play at work, but for an advance of over 300% looks something immensely more than what it seemed.

Then came thoughts of a possible new oil reserve find or an activation/speculation of its oil drilling project/s locally. Yet, the market remained as animated and heaped by persistent speculations with no news to back it up.

I attended Thursday’s investor’s briefing precisely to find out the reason for its recent explosion only to be disappointed. What has been said in the presentation, aside from the financial updates, was basically the same as what it had reported last September.

Then came Friday morning’s news disclosure. The company announced that its chairman Delfin Lazaro sold his 1,000,000 shares on the March 16^th and 17^th alongside with colleague Director Cesar Buenaventura and company president Milagros Reyes.

At the end of the trading day Friday, the company likewise disclosed that Monte Oro acquired 10,015,098 shares which represented 9.51% of the company’s outstanding stock! This had to be it! From April 19 to Friday’s close, total shares traded was a little over 65 million shares! This meant that about 15% of the accrued activities during these days had been due to Monte Oro’s acquisition at the board!

Without such substantial acquisition activities there would not have been a big advance, not earnings not dividends, as previously shown have driven its share prices but a serious investor willing to accumulate at market prices!

With the completion of the buy-in plus the unloading of insiders, it certainly looks likely that the play is over!

What remain for the company would be the dividends it may likely declare, considering the huge windfall arising from the sizeable spike in oil prices. However, the impressive advance of its share prices has made this more or less moot.

I remain bullish over this company, which allowed me to score a homerun for a second time, but would acquire back its shares when the public has dispensed of its speculative interest.

Besides, I foresee a major oil find by the consortium given the bright potentials of its fertile oil fields.