Markets are tanking & so is crude oil etc & that is having a very adverse impact on all stocks including energy stocks. But to look for the main reason why CLL is trading at $.25 & pricing in bankruptcy you have to look at the balance sheet of the company. You have to take a good look at the liquidity position of the company & see current assets & liabilities. Net profit / loss & annual budget for maintenance expenditure etc. Basically cash inflows & out flows.

By looking at last reported financial results & news release you can make an educated guess where CLL stands & what are near term risks & what you have to look for when you have a position in the stock.

The first thing that you have to look at is at networking capital, which is the difference between current assets & liabilities. This tells us what are the current assets, which can be converted & used to pay current liabilities that are due within one year. Then you have to look & add any potential cash burn rate & the maintenance or capexp for the year..

The most important thing is to first focus on networking capital.

Current Assets

Cash 31.5m

Trade & Acc rec 72.7m

Inventories $61.8

Investment in Sec 21.2m

Other Assets $10.5

Assets Held for sale 11.3

Total : current assets $209 million

Current Liabilities

Trade & Accured Payables $75.2

Current portion of long term Debt $101.5

Risk Managment contracts $13.4

Total current liabilities $ 190.1

Net working capital current assets $209 – current laiblities $190.1 = $18.9.

Things look good the company can pay all its current liabilities & still have extra cash of $19 million left. But when you look at the composition of current assets there is an item of investment in securities for $21.2 million. Which is there but they would have to first sell the 3.3 million shares of Gran Tierra Energy in the present market. This stock is today trading at $4.65 so this investment is worth only $ 15.3 million & not $21.2 million as reflected in the current assets & when they actually start selling they might even get less than $4.65 per share.

This networking capital does not take into account any negative cash out flows because of burn rate or the planned maintenance expense of $30 million for the year etc. Or the cash proceeds from future sales or loans from banks etc.

There is a new development, the company just sold a property for $26 million & have confirmed that they now have $75 million in cash plus $100 million bank facility, which is encouraging that the company will be able to make its $100 million payment in June 2012 & there will be no default. After the payment of $100 million the other debt payments are not due for a long time. CLL have very high interest payments but still they will be able to kick the can down the road for a while. They have $100 million credit facility that has not been used so far. Can you trust banks when things go wrong? So far they can draw $100 million from the bank which is very good.

3 Qtrs results will be announced on Oct 10 you have to keep a watch at the networking capital & see if there is negative cash out flow for the quarter. Last qts they lost $44 million but there were lot of non cash items in that.

I say that based on the present situation the company will be able to meet its next payment loan payment in June 2012 & has time to find JV partner or a buyer with big pockets. So far they have managed to pay the bill by selling their properties. This cannot continue forever because they have some serious problems resulting from huge debt & under production. . Selling properties has given the company some life line. At the present prices the company cannot raise too much money from the markets.

This management is always wheeling & with dealing financial products. They are fully capable of wiping out the present shareholders. By converting some of the debt into equity, reverse split, increasing the share price & then going to the markets for more funds. At this time the choices are getting limited. This company or its assets may survive the bigger question is will the present shareholder survive too. Look at what happened to Compton petroleum shareholders.