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I am a full-time investor/trader, fund manager, and father. I have a B.S. in Physics and a B.S.M.E. in Engineering from the Georgia Institute of Technology, a M.S. in Physics from Leland Stanford Junior University, a M.P.P. from the John F. Kennedy School of Government at Harvard University, and... More
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  • Will 2014 Be The Year Of The Microcaps?

    I think we can all agree that last year was every investor's and/or trader's dream. The markets increased in value, on a whole, by approximately 30%, and from whatever part of the economic spectrum you hail, it would've been difficult to actually LOSE money for the year, without making a conscious effort to do so. The large cap and mid cap stocks were simply on fire, and while we all climbed the wall of worry in anticipation of everything from QE tapering to anemic job growth, we still made money. It didn't seem to matter what we did ... we still made money. In fact, I would dare to venture that many individual investors outperformed even the best performing mutual and hedge funds, and any other investment vehicle you can imagine. Part of it WAS the QE, but part of it was also the result of nearly 6 years of pent up desire to trade something; ANYTHING, in order to not only make money, but to quench the thirst of the gambler inside each of us, no matter how well we keep him in check. And so, the U.S. markets flourished during the year 2013. Now what?

    I believe that 2014 will continue to see the markets flourish and money to be made, but I see a frothy head on this glass of stout, and it primarily resides on the top of the large and mid-cap beers. I don't see commodities or bonds as an alternative to these hard run securities, either. What I do see, and we saw beginning to occur in the world of small-caps during 2013, is a move to more speculative plays, because to put it bluntly: The upside to most of the mid and large-cap stocks needs a breather. But, instead of just putting their money into REIT's, ETF's, and even more small-caps, I believe we could see a substantial move to the micro-caps. That's right, I said it. The Land of Copper! Or, for those of you whom have quickly tired of my metaphors (I know I have), penny stocks. Even sub-penny stocks. And I'm going to explain to you why.

    First of all, not all penny stocks are terrible companies. I find it amusing at times that the most experienced of investors sometimes seem to forget the very REASON the OTC exists. It exists so that companies can raise money without having to give up gargantuan future profits to potential venture capitalists. In fact, the simplest way to think of trading a stock on the OTC (indeed ANY stock) is to think of it as offering the retail investor the chance to become a venture capitalist, investing his or her money in a company whose product they believe in (for the purposes of this magnificently crafted metaphor, I won't go into the flippers, swing traders, scalpers, etc., although even they play an important role in the markets by providing much needed liquidity).

    Now, that being said, let us NOT underestimate the extremely high risks involved in not only trading a company's stock on the OTC because the company can't afford to trade on one of the major exchanges, but also because the OTC lacks entire encyclopedias full of rules and regulations (read: oversight) that even the most taciturn exchanges have in place to make sure that there is at least the semblance of a fair playing field. I am, of course, oversimplifying things just a bit, but only to make the point that, while stocks trading on the pinksheets can offer tremendous potential for a very fast and high ROI, they can just as easily take your money and run. This is because of the nature of the beast. The high risk to reward ratio oftentimes feels more like gambling than either trading or investing. That's not to say that ALL stocks that start out on the OTC are scams or unworthy of a serious look. It's just that they carry an inherently greater risk, and therefore, the POSSIBILITY of a greater reward capacity within a given period of time compared to their mid and large-cap brothers and sisters. And regardless of how serious your fund manager or financial advisor is, I can almost guarantee you that he or she spends at least part of their spare time, combing through obscure websites and SEC filings, dutifully attempting to put together a more complete image of what may have befallen a certain company's stock, or if lucky, what makes it that rare "diamond in the rough" that we all dream of finding. And yes, we ALL have done it before, at least from time to time. Why? Because, for a very small investment (sometimes as little as a few thousand or even hundred dollars), we can share in the opportunity to WIN BIG! In that way, it IS, indeed, like gambling. In other ways, however, if done properly, a potential investor can do his or her due diligence and end up with something more valuable than striking gold. But it's not easy. There are thousands upon thousands of them, and the pinksheets didn't get their reputation without a good reason. Many of these "stocks" are little more than ways to scam unsuspecting and novice traders/investors in handing over their often hard earned cash, just so the proprietor of the business whose shares you own may pay themselves an outrageous salary and live and extravagant lifestyle, without EVER having the slightest intention of making their "company" a success. Such is the way of free market capitalism in America, and if done properly, believe it or not, it is not illegal.

    Now that we've discussed a bit about the nature of stocks traded on the OTC, along with why I believe many investors will turn to microcaps in order to find that higher gain that they got used to in 2013, let's talk about some actual OTC stocks! There are two types of OTC stocks: 1.) The stock that used to trade on a major exchange and has, for any number of reasons, fallen below the said exchange's listing requirements, and 2.) The stock that started out on the pinksheets because it either could not FIND a venture capitalist interested in financing it, or the stock that voluntarily chose to raise money to finance itself by issuing shares, and selling them to would be investors who would then become part owners in the company, share in its profits, but almost universally, in the case of penny stocks, NOT have any significant control over the direction the company takes or the day to day operations of the company (and this is a good thing, for the most part, due to the too many chiefs and not enough Indians phenomenon). Most of the stocks in The Land of Copper that I choose to investigate and possibly purchase, fall into the latter category. Let's start with the basic statistics of the OTC. The odds of a stock trading on the pinksheets actually "making it" and ending up on a major exchange are something like less than 2%. Out of those, you have to comb through the stocks that once WERE traded on a major exchange, but no longer are, and the ones that started on the OTC and will one day (you're hoping) end up on a major exchange. In a sense, the latter type of OTC stock is simply a stock that has had its IPO without any fanfare and usually without any profits to show its investors, to begin with.

    Which stocks trading on the OTC make the best investments? Which of them have the best chance of "making it?" That's a topic of MUCH discussion amongst the "pinksheeters" (there's actually another name for that, but it's a bit crude, and I must endeavor to keep it clean on Seeking Alpha). In many ways, finding the right OTC stock to invest in is no different than finding any other stock to invest in. The same general principles apply. I look for a stock whose company has value, obviously. How do I know what said company's value is? I ATTEMPT to find out in much the same way as a stock traded on the Nasdaq or NYSE, but herein lies the difference: Stocks traded on the OTC are not required to meet the same filing standards as those on various major exchanges. In other words, they are not required to divulge certain information to their shareholders, either at all, or at least in a timely fashion. To put it simply, they're not required to be as transparent as those listed on major exchanges. However, this DOES NOT mean that they won't, and that's one of the criteria I base my judgment on. How transparent, forthcoming and easy to get in touch with is the company I choose to invest in? Some are virtually black holes, where your money goes in, and little to no information or money ever comes out. These are obviously not your best bet. Strangely enough, they might become immensely successful and blow away the competition, but it's just that they have little to no interest in shareholder communications. That's not necessarily a bad thing, as any early investors in Apple, Inc. (AAPL) can attest to, but as a general rule, you're looking for as much transparency as possible from the companies you're invested in. The reasons for this, especially on the OTC, are obvious. Without information, you simply have no way of making investment decisions, or even worse, sometimes the information listed is grossly out of date (think of outstanding shares). Without an accurate and current outstanding share count, there's simply no way to calculate market capitalization. There's one search engine/portal/website in particular, whose financial information and key statistics are always so horribly out of date, that I don't even bother checking them any longer, and I've seen many swing/day traders get burned rather badly by basing their trading decisions on that outdated information. For instance, I have a long position in a microcap oil and natural gas company called Petron Energy II, Inc. (PEII), and this particular website had its OS listed as approximately 9 million shares for quite some time, when it was obvious that number was incorrect, due to dilution, as well as the fact that, had that OS number been accurate, the market cap of the company would have been ridiculously low. How was that problem remedied? A fellow shareholder called the company and insisted that they keep a more current number of OS listed. The company listened and proceeded to keep its current OS on the homepage of its website! And that has helped tremendously. In fact, it's the reason I initiated a long position in (PEII). They care about their shareholders, and want to maintain as much transparency as possible. They've also started to have their CEO, Mr. Floyd Smith, appear on a business radio station every couple of weeks. That's important, because this is a very small company. If you're a shareholder in (PEII), you want to know what the shares outstanding are. You want to know what the latest production numbers are from their different well leases. And if the 5% stake in the Bakken Shale field deal is consummated with Phoenix Energy, you want to know that information, too! Why? Because this information directly affects the company's PPS.

    Another OTC company that does a good job of maintaining good investor relations and transparency is a bioresins manufacturer named Cereplast, Inc. (CERP). Their CEO, Frederic Scheer, appears on various sector-related news programs, and he himself is the co-founder of theBiodegradable Products Institute (BDI). But they DO NOT maintain an accurate OS anywhere that I can find. It's approximately 1 billion OS at this point, but until their quarterly meeting, there's really no way to be certain, and that makes it very difficult for potential investors to put a valuation on the company. Yet, still, it was up over 25% today. Petron Energy II was up 50% today! And that's after 3 previous days of gains, two of which were 30 plus percentage gainers.

    There are many others, too. Growlife, Inc. (PHOT) is up over 100% in the past week based on the recent legalization of marijuana in Colorado (they grow medical grade marijuana), and their balance sheet isn't bad looking for a penny stock. A week ago, you could have bought (PHOT) for approximately $0.11/share. today you could have sold that same share for $0.23/share. The future looks bright, for the moment, for companies that specialize in growing marijuana!

    I've named 3 penny or sub-penny stocks in this article, and all of them have a great deal of potential. I either currently own, or have previously owned all of them at some point, and I've made money on all of them. But how do we pick the next three? What's one of the major benefits, as well as drawbacks to investing/trading penny and sub-penny stocks? Well, for one thing, they tend to be very volatile. That's a good thing if you want to stare at your screen all day long, but if you have other things to do, it might come as a shock to you to come home and find out that your 100,000 shares of WXYZ are only worth 25% of what they were when you left earlier! It sounds like a nightmare, doesn't it? It's not, and here's how you do it:

    1.) Never invest money in a penny stock that you wouldn't be willing to give away to a charity.

    2.) Always do your due diligence on ANY stock you purchase, regardless of how inexpensive the stock price is, or how small of a position you're opening.

    3.) It's never about the actual amount of money lost or gained, it's about the percentage loss or gain (I know how that sounds, but you wouldn't believe how many novice traders can't grasp this basic concept).

    4.) Decide what percentage gain you're willing to take for a stock you own, and sell it for that, no matter what. If you get a 100-300% gain in one or two days, sell your shares and lock that profit in. Period!

    5.) Decide how much you're willing to lose on any open position (percentage-wise). If you lose 10% of your investment, sell. Don't think about it, just sell it and move on. There are thousands of stocks to play, especially on the OTC. The only exception is if you bought the stock for a good reason, and don't plan on selling it until it's reached that price per share. This is the same principle, but in reverse. What you're really doing is teaching yourself become disciplined in your trading.

    6.) The oldest cliche' in the book, but it's still true, ESPECIALLY with micro-cap stocks! Do NOT marry your stocks! There will always be another "once in a lifetime" opportunity. Microcap stocks are just too common and too numerous for it to not happen again. It's just a matter of patience. This is where you MUST detach yourself from your emotions and let the price come to you.

    I believe those six rules will make you, if not a great investor and/or trader, at least a good one. And if you follow them, at the very least, you won't go broke. Now, to wrap things up, I just want to point out that when the markets start getting frothy, it's an ideal time to start looking for your diamonds in the rough. You have the funds because last year was an amazing year, so why not take some of it and put it in something that could maximize your returns during what will likely be a less high-flying year for the mid and large-caps? I've listed three in this article that I believe will be major winners in 2014: Petron Energy II, Inc. (PEII), Growlife, Inc. (PHOT), and Cereplast, Inc. . For more information, you can read my article on PEII here, and an article from another Seeking Alpha contributor about PHOT here.

    If you have any questions about any of the smallcap stocks I've referenced above, or just wish to comment on, or discuss something about the article, please feel free to leave a comment below or message me. Have a pleasant day.

    Disclosure: I am long PEII, PHOT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Jan 08 6:44 PM | Link | 11 Comments
  • Update On Petron Energy II (PEII)

    I'm finally back home! Arghhh!!! That was a long drive and a lot of work (doing a real estate deal in South Florida)! Just wanted to check in with my PEII brethren. I can't go into details about my conversation with "my guy" for obvious reasons, but I will say this: If you're in, my advice is to hold. If you're not in, my advice is to buy in. If you're in and have the extra money, my advice is to buy as much more as you can, like I am, because I believe the news is REALLY REALLY REALLY good! I'm walking a thin line, here, but I'm not technically breaking any rules or laws. "My guy" is not technically an insider, but he does know Floyd Smith very well, and used to be his partner in other ventures, a long time ago. They're still on good terms and speak frequently, and since I also know him, I trust his assessment of Floyd's demeanor at the moment. A direct quote from "my guy" from our conversation on Friday: "Floyd is walking on air right now, and I'm pretty sure I know why." To my knowledge, he doesn't have any insider information anymore than I do, but we both had a nice long conversation about the possibilities, and we both came to the conclusion that the cold weather in N. Dakota, coupled with the bad press of the extra volatility of the light sweet crude that Bakken produces (which is silly, because that's the best kind DUE to the fact that its flashpoint is lower) is resulting in a higher demand for traditional oil producers, including the reworked wells that PEII operates. He also thinks that the production numbers for the Edwards leases in OK are going to be blowout numbers. I didn't ask him to go into details about why he thought that (if you want to keep your friends/contacts, I suggest you don't push them on things that could result in bad things happening to them), but my guess is that it's because Floyd seems to be "walking on air" lately, as he put it. You guys do your own DD, and DO NOT take my word for it. I'm just sharing the information I have, and the recent price action would seem to indicate that it's probably good info. Either way, I guess we'll find out soon enough. GLTA and happy trading!

    BTW, if you want to try to connect the dots as to who "my guy" is, the company he used to be partners with Floyd Smith in shares his name. I think I can get away with saying that without breaking any laws or incurring his wrath. ;)

    Disclosure: I am long PEII.

    Jan 05 4:07 PM | Link | 5 Comments
  • The Most Promising Oil And Natural Gas Company You've Never Heard Of ... For A Good Reason

    We all know the drill. I've got a hot penny or sub-penny stock that's going to be the next Google (NASDAQ:GOOG)! This one is the real deal! Put $1,000 in this stock and you'll be a millionaire in a few years!

    If I had a penny for every time I've heard or read about the stock I can buy 100,000 shares of for a few thousand or even hundred dollars, I'd ALREADY be a millionaire. Occasionally, though, a stock in the right sector, with the right business model, and a visionary leader can make dreams come true. After all, Steve Jobs was laughed out of every bank he went to for a loan when he first started Apple (NASDAQ:AAPL). The point I'm trying to make is that it DOES happen. Rarely, but it DOES happen.

    After researching it for over a year, I believe one such company is Petron Energy II, Inc. (OTCPK:PEII).

    Introduction to Petron Energy II

    Petron Energy II, Inc. is engaged in acquisition, development, exploration for, production, and sale of oil, gas, and gas liquids in Texas and Oklahoma. The company owns a 75% stake in approximately 2,600 acres with 59 wells in Wagoner and Tulsa counties, Oklahoma. It also operates two gas gathering systems for the transportation of natural gas, which are located in Tulsa, Wagoner, Rogers and Mayes counties of Oklahoma, with a total of 5,000 acres under lease, and a total of 93 existing wells which will require rework operations to attempt reestablishing commercial production in both Texas and Oklahoma. The company was incorporated in 1998 and is based out of Dallas, Texas.

    Executive Summary

    Floyd L. Smith - CEO

    Mr. Smith holds a Bachelor of Business Administration from Harding University, and has over 19 years of experience working in the oil and gas industry. In October 1998, Mr. Smith started Petron Energy, Inc. and has been involved in all administrative and field operations for the company. Under his leadership, the company has funded and drilled over 50 wells in twelve years. Petron Energy II, Inc. is the successor to Petron Energy, Inc. He has knowledge in all phases of drilling, completion and production. He has worked closely with the project geologists and engineers in the origination and acquisition of oil and gas prospects. Mr. Smith is also a member of the president's council of Harding University in Searcy, Arkansas.

    Jerry K. Ebanks - Geologist

    Mr. Ebanks received his Bachelor of Science in Geology from Lamar University and his Masters in Geology from the University of Texas. He has worked in varies senior level position in his 46 year career. Mr. Ebanks has extensive experience in East Texas, North Louisiana, Mississippi, Alabama, South Arkansas, Florida, Offshore Gulf of Mexico, Alaska, China, Australia, New Zealand and Indonesia. In addition, he performed geological evaluations, wellsite planning, mapping seismic planning, seismic oversight and seismic interpretation. Mr. Ebanks brings a very unique set of skill sets which will be very to our company.

    David Knepper - Petroleum Engineer

    Mr. Knepper has a Bachelor of Science in Engineering from Texas A&M University. He has over 37 years of experience working with oil and gas companies, specializing in production, completions, operations, reservoir analysis and acquisitions. Additionally, Mr. Knepper has expertise in both the technical and financial sides of the oil and gas business.

    Luke C. Zouvas - Legal Council

    Mr. Zouvas has a Bachelor of Arts degree from San Diego '96 and his Juris Doctor is from Thomas Jefferson School of Law '99. His primary focus in law has been the areas of corporate securities, mergers and acquisitions, as well as real estate. He has worked on numerous mergers and acquisitions, advised public companies on securities law issues, advised private companies on general corporate governance matters and engaged in the pro bono representation of small business owners.

    Mr. Zouvas has represented issuers and underwriters in initial public offerings, Direct Public Offerings and secondary offerings of securities under the Securities Act of 1933. He also regularly counsels issuers in connection with the preparation of and filing with the Securities and Exchange Commission of periodic reports under the Securities Exchange Act of 1934.

    He has a mastery of securities law compliance, having prepared proxy statements, periodic reporting documents, private placement documentation and registration statements, among others. He also has counseled numerous entrepreneurs and early stage companies. Mr. Zouvas has advised issuers, private equity funds, and placement agents in private equity and debt transactions. He also has worked with placement agents and issuers with respect to offerings of securities pursuant to Regulation S and Rule 144A under the Securities Act.

    Bob Currier - V.P. of Finance

    Bob Currier has a CPA certificate and has over 35 years of experience both in the public accounting and corporate sectors. Since 1987, Mr. Currier has been involved with entrepreneurial ventures in industries ranging from medical to real estate to oil and gas. With these companies, he has been responsible for developing financial reporting systems, helping raise capital, implementing internal controls and budget preparation. His experience has included both public and private entrepreneurial companies. He has also worked on SEC reporting engagements on a contract basis.

    Mr. Currier started his professional career in 1971 with the audit staff at Ernst & Ernst in Kansas City. After six years, he transferred to the Paris, France office where he spent six years working on the audit of the French national oil company (Elf Aquitaine) and U. S. companies such as Eli Lilly and Harris Corporation. On the French national oil company audit he was responsible for the exploration and production subsidiaries, the consolidation and joint venture audits. From Paris he moved to the Dallas office and transitioned from oil and gas auditing to entrepreneurial services and was named the Vice Chairman of the entrepreneurial services group. Mr. Currier's experience with the entrepreneurial services group included working with business plans and financial projections for various start-up companies. We believe Mr. Currier's level of experience provides Petron II with a clear advantage and he is a true asset to the company.

    Judson F. Hoover - Director

    On July 11, 2013, Petron Energy II announced that it added Judson F. Hoover to its Board of Directors. Mr. Hoover has served as CFO of several Public Companies for over 10 years. Mr. Hoover is a licensed CPA; and has a B.S. in Accounting from Regis University and a Master's Degree in Taxation from the University of Colorado at Denver. This addition brings the total participants on the Petron II board to 3.

    Floyd Smith, President and CEO of Petron Energy II, Inc., states, "Mr. Hoover will provide several strengths to our company and we are extremely excited to have him join the Petron II family." Mr. Hoover states, "I am honored to join a team that has vision, and a great business plan. Petron II, under Floyd's direction has been innovative in every area. I look forward to working with such a dynamic and creative team."

    Petron Energy II's Strategy

    Petron's strategy is to acquire assets in proven areas with multiple pay zones, manage development cost and take advantage of new technology to maximize daily production rates. Their target market is the Woodford Shale in Northeast Oklahoma and the Tannehill Sand in Texas, with each offering a high success rate and the potential for long term cash flow.

    Secondary Completion Method

    In primary natural resource recovery, the initial approach to produce oil is generally via natural reservoir pressure or simple mechanical pumps used to raise oil to the surface. Most oil wells today have to be pumped. Primary oil recovery can only produce a small fraction of the oil in a reservoir. The need for secondary oil recovery methods arise from this fact. Waterflooding can be both effective and economical.

    Secondary recovery of remaining oil from a proven reservoir can be obtained by injecting water/gas ('water/CO2 gasflooding'), to maintain reservoir pressure and push oil out of the rock. Prolonged oil production can be achieved effectively once the primary production has tapered off. This is called secondary recovery.

    A well planned oil field can go a long way toward the reliability and overall cost effectiveness of a water/CO2 gasflooding project. One method uses centrally located wells that, once primary and secondary production declines, will be used as injection wells.

    These injection wells use water/CO2 gas to force the remaining oil reserves toward the extremities of the oil field. Increasing the viscosity of the water, allowing for drillers to gain 'control' over where the water flows. This allows for the introduction of water/CO2 gas into areas of the reservoir in which it naturally wouldn't flow. By forcing water/CO2 gas into the crevices around an oil reserve, oil can be 'moved' toward the production zone. Such techniques can raise production on these outer wells to near initial production numbers as well as allow for the recovery of up to 80% of the remaining reserves.

    Oil reservoirs suitable for secondary recovery projects have produced for several years. It takes time to inject sufficient water/CO2 gas to fill enough of the void spaces to begin to move the oil.



    Petron Energy II Pipeline, Inc. is engaged primarily in the transmission of gas and gas liquids for its own wells and third party wells in the United States. As of December 31, 2012 the Company is operating in the state of Oklahoma. In addition, the Company owns two gas gathering systems located in Tulsa, Wagoner, Rogers and Mayes counties of Oklahoma, one of which is fully operational. The pipeline consists of approximately 132 miles of steel and poly pipe, a gas processing plant and other ancillary equipment.

    Petron Energy II Well Service, Inc. is engaged primarily in Well Service operation for its own wells currently and expects to begin well service operations for third party operators in the future. As of December 31, 2012 the Company is operating in the states of Oklahoma and Texas. The Company owns all of its equipment used in the Petron Energy II Well Service, Inc.


    The company recently agreed to acquire approximately 2800 acres in Munday (Knox County) Texas, this property is comprised of 48 wells. The property has 34 of 48 existing wells capable of producing commercial quantities of oil. We are reviewing the property for further producing zones which may be available.


    Petron purchased a 75% stake in approximately 1100 acres with 59 wells in Wagoner and Tulsa Counties, Oklahoma. We have 56 existing wells and 3 newly drilled wells. This acreage has 5 to 7 payzones, which are capable of producing oil, gas and or both commodities.

    The company has purchased 75% equity stake in a 105 mile pipeline gas system, Petron Energy II Pipeline, Inc. The pipeline system extends from Wagoner County into Tulsa County Oklahoma. This system is critical to our development in the area because it provides us access to deliver our gas to market at minimal cost. We believe our ownership of the gas pipeline system will provide us opportunities to grow our acreage as we are the only transporter of natural gas in the area.

    The company has also purchased a 75% stake in a second gas pipeline system, Petron Energy II TNT, Inc. This pipeline system extends 30 miles through Wagoner, Mayes, Rogers and Tulsa Counties Oklahoma. There were over 450+ wells drilled and tested in anticipation of the completion of this gas system. This system provides access to a natural gas market for us along with development opportunities for the company. Petron Energy II TNT pipeline is the only gathering system to transport natural gas the area.

    (click to enlarge)

    Recent Events

    On Oct. 30, 2013, Petron Energy II, Inc. signed a Letter of Intent to purchase a 5% minority interest from Phoenix Energy, Inc. in the Bakken Shale Deal. The importance of this deal to Petron's future can't be overstated. At the time of the signing, the company estimated that the deal alone was worth $0.04/share. While some dilution has occurred since then, my calculations based on that estimate still put the Bakken Shale Deal at worth approximately $0.03/share. On that basis alone, this stock is a 10-bagger from its current trading price.

    On Dec. 5, 2013, Petron Energy II, Inc. announced that it had chosen an investment banker for funding for the Bakken Shale Deal and has completed a due diligence packet and forwarded it for review. CEO Floyd Smith stated, "We have received positive confirmation from the financing group that they have sincere interest in funding our Bakken deal and our goal is to have funding to close this transaction on or before December 31, 2013. Further, we expect to have a reservoir engineering report completed on this property within two weeks. We will report deal results as they are available." After speaking with Petron's legal council (listed above), I'm convinced that this is all but a done deal, and that finalization of the deal is only a formality requiring all prerequisite signatures, at this point.

    Looking Ahead

    With all of the research I've done on this particular stock and the underlying company, and with the company itself stating that it will be profitable by the end of Q2'14, I consider this perhaps one of the most undervalued stocks, penny or otherwise that I've ever done due diligence on. The share price has, in my opinion, been driven down by the sale of convertible shares, which was necessary to raise working and growth capital (for the record, there are indications that the company has stopped this practice, possibly due to positive recent events), as well as market makers naked short selling the stock. I have my own theories in addition to those obvious and very old tricks, but it would be mere speculation to publish them here. Suffice it to say that I don't think I'm the only one who realizes what's going on with this company and its share price, and that this will NOT, in my very studied opinion, be a gradual climb back to "pennyland." Rather, once the company starts to release its production numbers, coupled with the finalization of the Bakken Shale Deal, I believe this stock will gap up and go virtually straight up for quite some time. As always, there will be pullbacks and bumps along the road, but make no mistake about it ... if/when this stock goes back up, it won't be gradually. It is, of course, impossible for me to predict with any accuracy the future performance of this stock and its future share price, but I don't think it's unreasonable to expect a share price in the area of $0.20 by mid-2014, and possibly a climb to over $1/share over the next 2 years.

    Risk Assessment

    As always, we must acknowledge the reality of what we're dealing with, here. I feel it an important part of any analysis of any stock to keep expectations realistic and to openly state the very REAL risks involved in trading ANY penny stock. This is not a stock I would recommend anyone sink their life savings into (actually, I can't think of a stock I would recommend anyone do that with), and the risk of bankruptcy and a complete loss of your investment is certainly possible, but if you have a few hundred, thousand, or ten-thousand dollars lying around, depending on your individual fiscal situation, I believe this would be a much better investment, statistically, than purchasing a lottery ticket or taking that money to the tables at a Vegas casino.


    I'm a NAPFA Personal Financial Advisor with multiple degrees in mechanical engineering and physics from the Georgia Institute of Technology, and I formerly analyzed securities for what was then A.G. Edwards, so I'm hardly the gambling-type. I could never in good conscience recommend to one of my clients that they invest more than a few hundred dollars in any penny stock, but like anyone interested in investing and the markets, I do enjoy searching for that elusive hidden nugget of a stock that has gone largely unnoticed, and I enjoy the process of researching such stocks. It is my belief that Petron Energy II, Inc. COULD be one of those nuggets, and depending on what the future holds, I'll either become a hero to many (as well as rich), or the butt of many a joke. I'm not afraid of the latter, so I decided to make my opinion and research on this stock public. I hope it has, at the very least, been an interesting and educational read, and I wish all of you good fortune in your trades.

    Disclosure: I am long OTCPK:PEII.

    Dec 08 5:45 PM | Link | 19 Comments
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  • Also, I'm very busy doing other things now, so I'm no longer actively trading. Just longs & the occasional scalp. Got tips? I'm all ears. :)
    Jan 23, 2014
  • In short, buy $PEII today and triple your money in a week and a half, 2 weeks max. No brainer to me. GLTA.
    Jan 23, 2014
  • I've confirmed from 3 SEPARATE sources that the Bakken Deal is real & is supposed to close end of month. That alone is worth .01pps 4 $PEII.
    Jan 23, 2014
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