Could BP’s Oil Spill Help Fish Stocks Increase? And a Penny Stock Lying in Wait.
Posted: Tuesday, August 17, 2010
by John Paul Whitefoot
Penny Stock Insider
When I was in university I use to buy The Weekly World News regularly. Not because I found the writing to be particularly scintillating, rather, I loved the headlines. How can you not be drawn into articles that purport to show, (with photographic evidence) then President, George W. Bush meeting with aliens, or undeniable Elvis, Loch Ness, Big Foot sightings? Why just this week I read on The Weekly World News website that "Alien Tells Larry King to Leave CNN", "Harry Reid Joins Male Brothel", and "Obama Releases Chupacabra Into Arizona."
I was surfing the net this week when I came across this headline on a (somewhat) respectable news site, "How BP's Gulf of Mexico oil spill could actually lead to an increase in fish stocks."
Apparently, the massive BP oil spill could "lead to increased fish stocks and improvements in biodiversity in the Gulf of Mexico," said one marine expert.
Government scientists, it is claimed, have concluded that three-quarters of the leaked oil has evaporated, dispersed, been burned off or been contained. A leading marine scientist said that the culmination of a fishing ban in the region and swiftly dispersing oil could actually lead to fish stocks improving.
"The oil may have killed fewer fish than the fisherman would have done," Martin Preston, senior lecturer in ocean sciences at the University of Liverpool, noted. "Stocks may look better next year but we won't know until then. The big imponderable is the effect of the toxicity of the oil on the larval stage of the fish."
Dr Preston, who studied the impact of a larger spill in the Persian Gulf after the 1991 Gulf War, said that incident led to bigger catches in the following years.
Again, not a surprise perhaps, that a British marine scientist, might play down the possible impact of the Gulf oil spill; and an American oceanographer would make note of the long-term impacts.
Will there be any way to verify claims that BP's Gulf of Mexico oil spill could actually lead to an increase in fish stocks? Right now, all we can really do is wait until next year to see if the Gulf fish stocks rebound; small consolation for those that make a living on the Gulf of Mexico.
What does this have to do with penny stock investing? As penny stock investors, it's up to us to find underpriced stocks that are trading below the radar. But where to look? Current events can have a positive or negative impact on a penny stock's share price. The Gulf oil spill has had a negative impact on a large number of stocks.
One penny stock that took a hit following the Deepwater Horizon accident in April is Omega Protein Corp. (OME - NYSE), North America's leading manufacturer of marine protein and fish oil. Before the explosion, OME was trading at $7.00; following the accident OME's share price dropped to $4.00.
Was the drop in OME's share price justified? Or was it a knee jerk reaction that has opened up the door to long-term growth opportunities?
In the first quarter (ended March 31, 2010), OME saw its revenue increase 6.9% year over year to $32.3 million. The company also reported ongoing profitability of $1.0 million or $0.05 per share.
In late April, following the Deepwater Horizon oil spill, the company implemented an Incident Response Plan for its Moss Point, Mississippi facility to minimize the effects caused from the oil spill in an effort to minimize vessel downtime and business interruptions.
In response to the spill, the company shuffled its Moss Point fishing fleet to fishing grounds on the west side of the Mississippi River Delta. In addition, the company's Reedville, Virginia plant with its ten fishing vessel fleet commenced its fishing season on the Atlantic.
In early June, OME provided an update on its fishing efforts as of the close of business on June 6, 2010. As of that date, the company's total fish catch was at approximately 100% of the company's total 2010 fish catch plan. However, the company's Gulf of Mexico fish catch was 17% behind its Gulf of Mexico 2010 fish catch plan. OME's fishing facilities on the Atlantic coast are coping with this loss.
In early July, OME adopted a shareholder rights plan to protect the company from unfair or coercive takeover. The company believes that the current market price of its shares do not adequately reflect the long-term value of the company.
In mid-July, OME announced that, as of that date, its total fish catch (Gulf of Mexico plus Atlantic) was at approximately 89% of the company's total 2010 fish catch plan. The company also filed a claim with BP for reimbursement of any costs or lost profits resulting from the Deepwater Horizon incident.
On August 6, OME announced its financial results for the second quarter ended June 30, 2010. Not surprisingly, second quarter revenue declined over the same prior year period to $36.3 million. At the same time, OME swung to second quarter profitability of $2.0 million or $0.11 per share.
While it appears as though OME's revenues will be down in the short term, the company's Atlantic operations, reimbursements, and resumption of fishing in the Gulf of Mexico should more than make up for the short fall in the long term.
If the Gulf of Mexico fishing stocks do rebound in the next couple quarters, by this time next year, OME's current share price could look like a bargain. And OME will definitely be the one penny stock that didn't get away.
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Top-level comments on this article: (1 total)Well if there is a positive result from the oil spill, that will be wonderful. Let's hope BP doesn't get hold of the idea, though!
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