AER Energy Resources, Inc. (PINKSHEETS: AERN), a diversified holding company with an emphasis on oil and gas exploration, drilling, well completion and fuel distribution, has seen trading activity spike as of late as analysts predict oil and gas prices will continue to rise through the next several months. While news of this sort should trigger the interest of investors that interest should probably be focused on companies that are actually in a position to capitalize on the situation.
For their part AERN has tried to reassure shareholders and investors, announcing plans for growth and anticipating strong revenue for the future. Of course what company doesn’t plan for growth or anticipate revenue? The problem to date is that AERN has done little to indicate they are capable of achieving either of these goals.
Now on Wednesday AERN stated that Wade Well Service had completed reworking the three secondary recovery wells at their Copeland and South Wade leases in Texas, pushing the number of producing wells from the leases to six and with current estimated production at 200 BOPM that would put the company in an enviable position.
Just how enviable, well Al Karmali, President of AER Petroleum, Inc. a wholly owned subsidiary of AER Energy Resources, Inc., stated “With oil prices continuing to rise and now exceeding $100/bbl, it is allowing AERN to invest in wells that until recently were shut in during times of low oil prices. AERN has maneuvered itself into an excellent position moving forward by purchasing several leases with secondary recovery opportunities. We are well prepared to take advantage of these higher oil prices.”
Here’s what AERN anticipates, $250,000 in additional annual revenues from the six reworked wells and up to $1,000,000 annually from an addition four new production wells identified by the operator on those two leases. The drilling on those four new production wells is expected to take place in the second quarter of 2012.
In addition to activity taking place with their Copeland and South Wade leases in Texas, AERN has also acquired three Oklahoma oil and gas leases from Texas Energy, Inc. and AER Petroleum expects to begin secondary recovery on the three existing wells and plans to commence drilling on all three leases by mid-April. This could bring AERN an additional $20,000,000 in annual revenues.
By all accounts AERN’s outlook goes well beyond optimism, it should be recalled that the company reported revenue for the three month period ended December 31, 2011 at $3,525.
While shares of AERN have seen improvement, climbing as high as 0.0129 on February 15, 2012 after they announced the acquisition of the Oklahoma leases, they have since fallen to a low of 0.0050 on Thursday and the only thing propping them up has been a promotional campaign that centers on rising oil and gas prices.
The problem with that is AERN is not currently in the position to capitalize on the rising prices; they still need to produce results from these leases. This will obviously cost money and at the moment the only way to fund their business operations is through the sale of securities and looking at the history of AERN its clear that they have no problem with that course of action.