It’s been an exciting couple of weeks for New Concept Energy, Inc. (NYSEAMERICAN:GBR). GBR stock had almost continuously traded under the $2/share mark dating back to late 2016. Trading volume was light, and it looked like New Concept was doomed to remain a penny stock for the indefinite future.
However, all that changed starting June 28th. On that day, GBR stock doubled for no apparent reason, rising from below $1.50 to as high as $3. On July 2nd, things really went wild for GBR stock, as the share price moved from around $4 to above the $10 mark during the trading session That’s right, the stock advanced more than 150% on the day.
Since then, GBR stock appears to have stalled out and is now in decline again. After hitting its peak of $12 on July 3rd, New Concept Energy quickly lost two-thirds of its value, dropping back down to $4 per share. Since then, the share price has traded between $4 and $5.
What Does New Concept Energy Do?
According to the company’s SEC filings, New Concept has a lengthy history. It was incorporated in Nevada in 1991 as Medical Resource Companies of America. In 1996, the company changed its name to Greenbriar Corporation.
That wouldn’t be it for the change in business names and direction. In 2005, the company pivoted to telecom, changing its name to CabelTel International. Finally, in 2008, with oil prices surging, the company bought some oil and gas properties and came up with yet another new moniker, New Concept Energy.
As the company says in its SEC filings, this is now what it does:
“The Company, through its wholly owned subsidiaries Mountaineer State Energy, Inc. and Mountaineer State Operations, LLC, owns and operates oil and gas wells and mineral leases in Athens and Meigs Counties in Ohio and in Calhoun, Jackson and Roane Counties in West Virginia. The majority of our oil & gas operation was acquired through the acquisition of the Carl E. Smith Companies in 2008.”
New Concept currently operates 153 producing wells, has a number of non-producing wells, and controls 20,000 acres of mineral leases. In addition to that, until last year, the company also, for whatever reason, operated a retirement community for 114 residents. However, the owner sold the building recently, and terminated New Concept’s lease on the property.
New Concept Is Tiny and Loses Tons of Money
As you might expect, a collection of oil and gas wells in Ohio and West Virginia, along with a small senior living facility is hardly a recipe for a giant success of a business. In fact, this company is tiny. As of December 31st, 2017, New Concept Energy employed six people. Yes, the company has six employees — less than your average pizza joint.
The company appears to be stagnating. It has had the same number of operating wells, 153, over the past few years. Since 2015, oil production has fallen from 6,100 barrels of oil to 5,100 barrels of oil in 2017. Regardless, this is a tiny operation.
In 2017, the company generated $791,000 in revenues. You read that right, for the whole year, New Concept generated less than $1 million in sales. That figure was up slightly from $764,000 of sales in 2016, and down from 2015’s banner year of $820,000 in revenues.
It’s not enough to fund a working stock exchange-listed business in any case. New Concept had more than $4 million in operating costs in 2017, resulting in the company losing more than $3.2 million for 2017. Needless to say, when base overhead costs run $4 million or so a year and revenues are under a million dollars, the company is doomed to heavy ongoing losses.
GBR Stock: Essentially Worthless
As of its last annual filing, New Concept Energy had just $4 million in assets. Around $500,000 of this was cash, $2.7 million is proven oil and gas reserves, and the rest being the company’s leases and equipment. The company had $3.6 million in liabilities at the same point, suggesting the company had a net worth of around half a million dollars, or 25 cents per share of GBR stock.
Given that the company is losing several million dollars a year, we’d expect the company to have a negative net worth by the end of the year unless they raise more capital. At $4/share, investors are valuing New Concept Energy at almost $9 million in market cap. That is insanely high, given the lack of profits or significant assets here.
GBR Stock: No Reason to Rally
There was no apparent reason for the huge run in GBR stock. The company said that it wasn’t aware of any reason for the move in its stock. In the past, penny stock promoting newsletters have endorsed GBR stock, causing sharp short-term run-ups in the shares of New Concept Energy. Historically, these have always failed quickly.
In this case, it appears GBR stock started to rally at the same time a number of other microcap oil and gas companies took off. The same day, June 28th, that GBR started its run, Pedevco Corp. (NYSEAMERICAN:PED) jumped more than 400%. Other names such as Camber Energy, Inc. (NYSEAMERICAN:CEI) also advanced sharply.
It appears that a spike in the price of oil caused day traders to gravitate to these tiny energy companies. Chatter among day traders on Twitter (NYSE:TWTR) would indicate that many trading groups and prominent penny stock operators such as Timothy Sykes were discussing these energy companies including GBR stock.
GBR Stock Verdict: Heading Back To $2/Share… Or Less
My best guess is that GBR stock had numerous short sellers betting that the company’s stock would fall toward zero as its asset base continues to erode. They were probably caught off-guard by the huge run in the stock on June 28th. That covering, combined with day trader interest and a tiny market cap allowed the stock to go wild to the upside. Throw in thin market liquidity around the July 4th holiday, and New Concept Energy briefly flew to the moon.
Unfortunately, there’s hardly anything backing up GBR stock.
The company has fewer than $1 million a year in revenues. New Concept Energy employs just six people. It isn’t developing many new wells. It has essentially no cash or assets. There’s simply nothing here to support the company’s current $9 million market cap or $4/share stock price. If I owned any GBR stock personally, I’d sell it as quickly as possible.
At the time of this writing, the author held no positions in any of the aforementioned securities.
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