boom bust or bankruptcy ahead

It's amazing to see the continuing support for Marion Energy in the wake of the recent glib Intersuisse recommendation and the Sun Herald news report. Both these scarcely authoritative commentators on oil and gas stocks have reported that the stock is going to $1.45.

Maybe it will but not on the basis of fundamentals.

Jeffrey Clarke the CEO of MArion since 2004 used to be the CEO of US comapny Coho Energy until it went bankrupt in 1999.
Clarke then joined Ascent Energy it came together after its predecessor organisation also went bankrupt. Clarke lasted there until 2003. A quick look at the books at Ascent Energy shows they rarely made any profits and had a net negative income of $21 million in 2005, the last year I could find figures for.

Still this scarcley profitable company as part of the restructuring, managed to buy out another company Pontotoc Production of which Clarke was also CEO and one of the principal. The deal went through when Clarke was CEO of both!!

So after Ascent, in 2004 Clarke comes to Carpenter. He offers the boys at Argonaut a deal which sees them raise $22 million less all the fees and commissions etc. Carpenter then uses the money raised to buy a 30% interest in Jefferson Mcleod in East Texas for $14,000,000. The deal was done with TR Energy Corporation, basically associates of Clarke. Since December 2004 when the deal was done there has been booger all work on this "world class" property. None at all in 2006. You wonder what Carpenter, now MArion got for its money.

That said if I am not mistaken Marion did manage to sell off a piece of the Jefferson Mcleod property to the hapless Odyssey Energy.

In 2005 Marion makes a deal with Mid Power Service Corp a pink sheet listed small oiler to farm in to Clear Creek, henceforth described by Marion as the "jewel" in Marion's crown.

Mid Power bought the Clear Creek property in 2002 from Red Star Inc a company owned by one Edward Mike Davis for a mix of cash, shares and a $10 million promissory note.

In December of 2002 Mid Power filed proceedings in the Nevada State Court against Davis claiming that Davis made number of misrepresentations respecting the value and potential of the Clear Creek Unit, the production capacity of the Oman 2-20 well then underway, the absence of environmental or other liabilities and the legal viability of the leases on the Clear Creek property.

Mid Power asserted that various of Davis' representations were false, "including the fact that the validity of the leases for the properties comprising the Clear Creek Unit may be challengeable due to a claimed lack of production in paying quantities". Mid Power noted the Oman 2-20 well was incapable of economic production "due to a high level of impurities" and the existence of environmental problems respecting two well sites in the Clear Creek unit that required Mid Power to incur US$230,000 for remediation and bonding.

Doesn't say much for the property does it? You would think that after due diligence one might be better off walking away from such a deal.

Mid Power couldn't reach a settlement with DAvis and guess what, they filed for bankruptcy.

But they survived to long enough to offload the properties to Marion over two year's ago in February 2005.

Mid Power's boss and majority stock holder was a one James W Scott. I don't know what his relationship is/was with Clarke or how Marion came by the deal. But clearly Marion threw him a lifeline, undertaking to farm in and spend US$20 million on a property which they, Mid Power reckon they were dudded on when they first bought it.

As for Jester Bloomington. this is a bunch of stripper wells. I haven't gone further than that. Marion itself doesn't make too many grandiose claims for that property.

So I say to all you buyers of Marion stock, keep a tight stop loss. The company spent $13 million in exploration and development in the March quarter half its available cash. At that rate it will be out of money by end of June and needing a top up. You have to wonder whether that is not behind the current spruiking of the stock. Get the share price and sentiment up and have a capital raising. Wait for it.

One ramper here suggested the Director's were buying the stock "en masse". Edgar bought a few but the others converted a small number of options that were expiring at the end of March with an exercise price of 25 cents. Please get your facts right guys.

It looks to me like this is a company that has paid a lot of money or made financial undertakings on some very dubious properties to in at least one case associates of the CEO then, with the assistance of the bello's of this world, pumped them for all they are worth with huge unrealistic reserves assessments, estimates of production and predictions of $10 million a year in cash flow. And the gullible and the greedy buy it every time.

Will MArion continue to go up? In the present market if it puts out a drilling report with some impressive flush production numbers, yep almost certainly. But eventually you would think that the weight of broken promises would have to weigh on the stock At least I would.

We will continue to dig into this intriguing little story. And report further in this week's OGW.

Goodnight Y'all.