Legends don’t become legends in a year or two that designation usually comes after proving yourself over a significant period of time. Unfortunately for Legend Oil and Gas, Ltd. (OTCBB: LOGL), which has concentrated on the exploration, development and production of oil and gas properties for less than two years, this designation has hardly been earned. It hasn’t been earned for the simple fact that the company hasn’t generated any meaningful revenue since they shifted from their business as a developer of web portal containing lists of senior resources across the United States, through their former wholly-owned subsidiary Senior-Inet, Inc. until now.
Despite the less than impressive growth of LOGL the company continues to trade above the 1.00 level, actually reaching a high of 1.21 on Monday, well above their 50-day moving average of 0.975 yet still a distance from their 200-day moving average of 1.80. That being said, LOGL has seen impressive trading volume, surpassing the 1.8 million mark late in today’s session.
As an investor it is difficult to really pinpoint where the value is in LOGL, their activities are currently focused on leases in Canada, southeastern Kansas and northern North Dakota yet those activities haven’t produced anything significant up to now.
Of course LOGL believes that will change with their efforts in Canada thanks in large part to their wholly-owned subsidiary, Legend Canada, completing the acquisition of petroleum and natural gas leases, lands and facilities held by International Sovereign Energy Corp. The net purchase price for the assets gained in this acquisition amounted to CA$8,905,031 in cash and 3,552,516 Common Shares. What should be noted by investors is the fact that Sovereign’s monthly average Boepd (barrel of crude oil equivalent per day) production during the month of August 2011 was below the threshold production level of 300 Boepd.
Essentially this acquisition may not be the cash cow that LOGL is forecasting. Something else investors should watch for is the fact that under the Asset Purchase Agreement, LOGL granted to Sovereign a “put” option to require them to redeem the Common Shares if they fail to obtain listing for their Common Shares on the NYSE, Amex, NASDAQ, or any other stock market more senior than the OTCBB on or before March 31, 2012.
Well that March 31, 2012 date isn’t too far off and while LOGL has shown a little life they may be hard pressed to attain that goal.
So what does LOGL actually have? As of September 30, 2011, their oil and gas property interests were located in the Piqua region of the State of Kansas and in the Bakken and Three Forks formations in Divide County, North Dakota. Their only subsidiary is Legend Energy Canada, Ltd., which was formed in Alberta, Canada on July 28, 2011, to acquire, manage and develop the assets purchased by it from International Sovereign Energy Corp., an Alberta, Canada corporation (“ISEC”), as mentioned earlier.
These properties did not do much for the balance sheet in LOGL’s last quarterly filing as they reported a net loss of $476,000 for the three months ended September 30, 2011, compared to a net loss of $44,000 for the three months ended September 30, 2010. LOGL had a net loss of $708,000 for the nine months ended September 30, 2011, compared to a net loss of $72,000 for the nine months ended September 30, 2010.
As pointed out by LOGL “The crude oil and natural gas industry is cyclical and the demand for goods and services of crude oil field companies, suppliers and others associated with the industry put extreme pressure on the economic stability and pricing structure within the industry.” Just how they plan to compete is anybody’s guess as they have limited financial resources at the moment and the revenue derived from their operations is clearly not sufficient to meet their operating costs.
This of course leads to raising money and there is no better way than to sell securities, ultimately diluting shareholder value. Until LOGL can prove they have the ability to not only explore and discover oil and gas properties but actually produced meaningful volume then that legend status should remain on hold.