Gulf United Energy, Inc. (OTC:GLFE) Waiting for More Promotional Gains, and More Debts
27 Jan 2011

A stock promotion from Monday this week made the stock of Gulf United Energy, Inc. (OTC:GLFE) gain its highest trading volumes ever in the past two trading sessions. The promotion came together with the filing of an amended quarter report, revealing that GLFE has even more debts than initially reported.

GLFE closed the market yesterday at $0.42 with yet another 5% increase in its share price. Trading volume kept growing and topped the record from Tuesday, the day on which the free trading alerts were sent to investors by a stock promoter. The number of shares traded exceeded 6 million yesterday. After the surging from this week, now it looks like the yearly high $0.50 is the next resistance to get hit, and technically that seems possible.

From a fundamental point of view, GLFE long-term perspectives do not look so bright. The company has some oil and gas interests in Peru, but is since its inception in 2003 in the development stage. So far, the only result from Gulf’s activities are accumulated losses and a dire financial condition represented by a working capital deficit of almost $5 million as of end-November 2010 and short-term debts of over $4.8 million, not the reported in the middle of the month $4.5 million.

On top of all, that debts are mostly unsecured, which means that shareholder dilution has been preassigned with GLFE’s total assets of $7.9 million, $7.7 of which being the money that the company has invested in its business in the past.

The latest 10-Q reports shows that in the quarter ended November 2010 the company issued an unsecured promissory note for $1.4 million, and issued common shares at a ratio of 10 common shares for each dollar borrowed, suggesting that the lender got the shares at a price of $0.1 each. Last Friday, Gulf United filed with the SEC to have sold in a private offering 12.6 million shares of common stock to certain investors for gross proceeds of $2.52. Registration rights have also been granted, implying that these new shares might appear for sale on the open market very soon. A bridge financing for $3.8 million in exchange for another 1 million shares (at a price of $0.20 each) has also strengthened GLFE financials, which if not repaid will cost the company one of its oil and gas interests.

From around 309 million at the end of last November, GLFE shares outstanding are now over 355 million and it looks like there is still upside potential as the company recently increased its authorized shares of common stock to 700 million.

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