It has been a difficult year for Cano Petroleum, Inc. (AMEX: CFW) and while there are still many investors who believe that the independent oil and natural gas company is an attractive bet that view is almost universally grounded in the idea that the company will eventually merge with another entity, sell some of their assets or be bought out. Essentially investors have expressed little confidence that CFW can actually overcome their host of problems and become a profitable company on their own.
There is good reason for this skepticism and CFW has done their part to warrant that opinion as they continue to run into delays in filing their quarterly report for the period ending September 30, 2011. Back on November 22, 2011 CFW announced they were unable to file this quarterly report within the five-day extended period they had been granted, on December 1 CFW announced they had missed their revised target date for filing, and just three days ago CFW announced in a press release that they now estimate that it won’t be until December 23, 2011 that they file this report.
Of course missing filing dates isn’t the only problem CFW is having, they are dealing with a potential delisting due to non-compliance with a series of requirements listed by the NYSE AMEX. The non-compliance issues include:
• Section 1003(a)(i) – stockholders’ equity of less than $2,000,000 and net losses in two of its three most recent fiscal years;
• Section 1003(a)(ii) – stockholders’ equity of less than $4,000,000 and net losses in three of its four most recent fiscal years;
• Section 1003(a)(iii) – stockholders’ equity of less than $6,000,000 and net losses in five consecutive years; and
• Section 1003(a)(iv) – Cano has sustained losses which are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the Exchange, as to whether the Cano will be able to continue operations and/or meet its obligations as they mature.
If that wasn’t bad enough, CFW is also facing delisting because they have carried such a low share price for an extended period of time. The only solution available for CFW to regain compliance in this area is a reverse stock split of their common shares which would obviously result in dilution, not to mention the very real possibility that shares would quickly drop back down to the range they currently sit, that being the 0.10 level.
Right now CFW management is under fire for their failure to properly handle this current disaster. Even with all of the filing troubles the Exchange provided an out for CFW, requesting a plan of action that they would take to remedy the problems and regain compliance. That plan was submitted by CFW on November 30, 2011 and two days later the Exchange sent a letter telling the company that their plan did not “sufficiently address” how they intended to regain compliance. Because of this the Exchange initiated delisting proceedings.
This can’t be seen as anything but a slight to shareholders of CFW who must be wondering who is running this company. Is there any way that management can justify how they have handled the past month? It appears as if they have simply thrown their hands up and decided to let the chips fall where they may.
No big surprise CFW has said they intend to appeal the Exchange’s decision but they are also taking action to have their common stock eligible to be quoted on the OTC Pink market. That’s not exactly a great sign for existing shareholders.
Frustrating shareholders even more is the potential that they see with CFW as the company holds nearly 50 million barrels of oil equivalent (MMBOE) of proved reserves. Turning those holdings into money has been difficult at best as CFW’s preliminary results for the three months ended September 30, 2011 showed revenue to be $6 million while net income was said to be between $1 million to $2 million for the three month period. The company is also carrying total liabilities of $115 million to $117 million as of September 30, 2011.
It can’t be ignored that the company’s proven reserves aren’t an attractive carrot for investors and certainly they are attractive to potential buyers. With continued unrest in the Middle East sure to keep oil prices high the opportunity that exists with a company holding such significant reserves may be too much to overlook. Shares have already hit an ugly low of 0.06 this month and it’s hard to see them sinking lower, in fact they are actually picking back up and have climbed as high as 0.11 on Thursday.
As bad as the performance of CFW has been the potential that still exists within the oil and natural gas company may just be enough to gamble on.