Dune Energy, Inc. (OTC:DUNR) Still Burdened with Debts, but Aiming the Highs Again
27 Jan 2011

Since the beginning of the year, Dune Energy, Inc. (OTC:DUNR) has been twice upgraded into a higher trading range, the culmination of which being the crossing of the $1 level in the middle of the month. Lastly, the company promised the spudding of another well these days, which probably makes investors more and more anxious as the news has not been released yet.

Over the past several days, it looked like DUNR stock could impossibly hold the $1 share price for more than a few days, but yesterday’s session shimmered some hope. DUNR was on the rise again, closing the market with 22.86% of added value and a new share price of $0.86. The trading interest was also satisfactory with 865,000 traded shares

The latest press release, and maybe the reason for the climbing DUNR share price, informed investors that the company has drilled a 19,500 feet subsalt test at Garden Island Bay Field in Louisiana, where Dune will have a 26% working interest after payout. Additionally, Dune intends to spud one more well at the end of this month, or in early February, and the company said it will have a 100% working interest in that prospect.

More interestingly, Dune commented also on its severe indebtedness, claiming that it has reduced its debts through the conversion of preferred stock into new shares of common stock. The value of that comment for investors is questionable though, since as an end result DUNR has now 2 million more shares outstanding, and liabilities still exceeding the assets.

In fact, the high interest expenses did not allow for the business to get profitable in the past several quarters, which probably explains the much lower than the average for the industry P/S ratio for the stock of Dune.

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