By their very nature, penny stocks are volatile and marked by sharp price movements that test an investor’s temperament. However, investors who can patiently hold penny stocks that are backed by strong businesses, consistent revenue, and future profitability may see outsized gains.
One such penny stock that has grabbed the attention of market participants due to its recent volatile price movements is Trio Petroleum (TPET), an oil (CLG25) and natural gas (NGG25) exploration and development company based out of Bakersfield, California. The stock has corrected by 58% over the past 52 weeks. However, it has rallied by a massive 72% in the new year.
So, should an investor look into Trio Petroleum as an investment in 2025 amid such brutal volatility in its share price? Do its operations, strategic moves and financials support it?
About Trio Petroleum Stock
Trio Petroleum’s oil and gas exploration and development initiatives focus on operations within the Monterey County area in California, particularly the South Salinas Project. Trio’s operations in Monterey County place it in a region with a rich history of oil production, potentially offering advantageous opportunities for exploration and development.
Its market capitalization is currently at about $5.2 million.
As per its latest quarterly filings, Trio reported modest revenue of $63,052. This was an improvement from the prior year, when it reported no revenue in the same period. Its loss from operations also narrowed to $1.5 million from $2.2 million in the prior-year period.
Encouragingly, the company reported net cash from operating activities for the nine months ending in July of $118,642 compared to an outflow of $2.5 million in the same period a year ago. Overall, Trio closed the quarter with a cash balance of $293,107 which was much lower than its short-term debt levels of $1.57 million.
Trio’s Assets
Trio Petroleum’s main asset is the South Salinas Project in Monterey County, California. The company estimates it has about 40 million barrels of oil (MMBO) and 42 billion cubic feet of gas (BCFG) in probable reserves (P2), equal to 47 million barrels of oil equivalent (MMBOEG). Possible reserves (P3) are estimated at 101 MMBO and 169 BCFG, or 129 MMBOEG. Trio expects the project could generate $2.1 billion in net cash flow from P2 reserves and $7.9 billion from P3 reserves.
The McCool Ranch Oilfield is another key asset where Trio owns a 22% stake. It includes six oil wells, a water disposal well, and facilities like storage tanks and pipelines. Trio has restarted three wells and plans to restart two more soon, with the potential to drill 20 new wells. The company currently earns 80% of the project’s net revenue.
Trio also owns a 2.55% stake in Asphalt Ridge, a major heavy oil and tar sands deposit in Utah’s Uinta Basin. The company has the option to increase its stake by 17.75% for $1.775 million. Each 240-acre section of the area is valued at around $4 billion.
Additionally, Trio plans to expand into Canada’s heavy oil sector. It has signed a non-binding letter of intent to acquire oil and gas properties in Saskatchewan’s Lloydminster region, known for low-cost heavy oil production.
The Bottom Line on TPET Stock
Still effectively a pre-revenue company, Trio Petroleum is operating at an interesting juncture when it comes to global energy needs. While the uproar over climate change is making the case for renewable energy stronger and consequently hinting toward a rising market for the same, President-elect Donald Trump’s love for oil is no secret.
As such, Goldman Sachs has predicted that the peak of oil demand is still a decade away,
Amid these circumstances, Trio’s assets in key oil-producing regions are a good sign for the company. However, a path toward revenue visibility and eventual profitability remains blurry and any prospective investor should be wary of the same before investing in this counter.
