Holloman Energy Corp (OTCMKTS:HENC) Disappoints Investors Again

Twelve months ago, Holloman Energy Corp (OTCMKTS:HENC) announced that their farmout partner (which we later found out was Terra Nova Energy Ltd. (CVE:TGC)) was coming closer to getting all the required documents for the drilling of the Petroleum Exploration License (PEL) 444 in Australia. The management team told us that clearance should be given within the next sixty days.

There was a delay, but in March, HENC issued another press release and said that the actual drilling should begin in Q2 of 2015. There were some more delays. First, the farmout agreement was terminated because TGC failed to complete the drilling of all the necessary wells on time, but it later turned out that the two companies will continue to work together after all. Unfortunately, TGC then had some problems with its shareholders which meant that the start of exploration had to be postponed further.

This is just a small part of HENC‘s rather long history of disappointing delays and unforeseen obstacles. Nevertheless, several weeks ago, HENC and TGC announced that drilling is finally about to start and, somewhat understandably, the shareholders were quite excited. The volumes were not exactly huge, but there were some active sessions and HENC was holding up relatively well above the $0.20 mark.

Investors were even prepared to ignore the rather sorry-looking state of HENC‘s latest 10-Q. Here’s what it looks like:

• cash: $29 thousand
• current assets: $45 thousand
• current liabilities: $325 thousand
• NO revenue since inception
• net income: $205 thousand (thanks to the depreciating Australian dollar)

It must be said that according to the Subsequent Events section, the company did manage to borrow $1.6 million in October which made quite a lot of people believe that thanks to its relationship with TGC, HENC will finally start generating revenues.

About an hour before yesterday’s opening bell, however, TGC requested a temporary trading halt from the Investment Industry Regulatory Organization of Canada (IIROC) due to a pending press release. Canadian companies can do that in order to give the market enough time to absorb the information in the upcoming PR.

HENC‘s shareholders saw what was going on and they were worried that the news won’t be good. The OTC company lost more than a quarter of its value and it stopped at $0.17 per share. Unfortunately, it turned out that investors were right to be worried.

A few minutes after the closing bell, both HENC and TGC announced that they have reached the target depth on the Mid-Birkhead channel which is a part of the PEL 444, and they have found no hydrocarbons. The well will be plugged and discussions on the companies’ next move will begin in the coming weeks.

So, nothing new, then. HENC recorded the latest in a long line of disappointments. We’re not sure whether they’ll be any brave souls left willing to trust the company after it, however, which is why a potential investment should be carefully thought through.