Earlier last week, the stock price of America Resources Exploration Inc (OTCBB:AREN) managed to record some gains after releasing the promising acquisition news of two oil and gas leases. As stated in the PR, the company has bought more than 900 acres land based in Callahan County, Texas. The acquisition deal is completed through its subsidiary unit Seabourn Oil Company. Evidently, the news was enough to get the attention of investors, but sadly only for a short period.
The stock momentum of America Resources in last trading session gives the indication that the recent up move has been over. As per the latest PR, the company showed that it is expanding and presented the acquisition as a positive development. However, the fact remains that the company is buying these oil and gas assets at a time when the international economy is facing severe oil crisis. In such a depressing oil market, the leases acquisition seems to be less lucrative measure.
Even if the problem of dismal oil market is ignored, there is another important element that reduces the significance of latest PR. America Resources didn’t provide any information as to how the company is going to fund all these recent acquisitions? As per the last report, the company had little funds to spare for operations, and it is now announcing ambitious acquisitions.
There has been no sign that reveals that the company has secured a credit line to fund these acquisitions. So, it would be not wrong to assume that America Resources is funding all the oil and gas leases acquisition by issuing toxic convertibles. As the past shows, the toxic dilutions have remained one of the major reasons behind sharp decline of stock prices.
America Resources Exploration Inc (OTCBB:AREN) ended the last trading session with a major loss of 16.69% and also traversed the entire short term range of $0.70-$1.00. The volume of 1.5 million was lower than the daily average of 2.4 million, implying that despite the major loss in price, the actual nature of the price action may be corrective only. Not only the price has been moving in the sideways range of $0.70-$1.00 for the last two weeks, the volume has been declining too. The bullish hopes are still alive but a break below $0.70 can severely damage the structure.