DD Support Board and Research Team

[nodummy]

SEC halts UnionTown Energy

2011-06-02 12:27 ET - Street Wire
Also Street Wire (U-*SEC) U.S. Securities and Exchange Commission
Also Street Wire (U-UTOG) UnionTown Energy Inc
by Mike Caswell
http://www.stockwatch.com/News/Item.aspx?bid=Z-C:*SEC-1848195&symbol=*SEC&news_region=C

The U.S. Securities and Exchange Commission has halted UnionTown Energy Inc., a heavily promoted OTC Bulletin Board listing run from Vancouver, citing concerns about its deals to acquire oil and gas properties. In a trading suspension issued on Wednesday, June 1, the SEC says that there is a "lack of current and accurate information" and a trading halt is necessary for the protection of investors.

The halt comes six months into a promotion that has seen the stock go from 38 cents to a $2.60 high, with volume of up to 6.8 million shares. (All figures are in U.S. dollars.) In that time, the company has announced deals for several oil and gas properties and, more recently, a $3-million financing. Paid promoters, one listing compensation of $2.5-million, have also been repeatedly hyping the stock.

It is not clear from the halt which of the company's property deals are in question. UnionTown's largest asset, according to its website, is a 24,000-acre block in a "prime location" of Wyoming with an estimated recoverable reserve of 120 million barrels of oil equivalent. The company says it recently acquired the property, called Darby, from a subsidiary of Talisman Energy Inc. Terms of the deal call for UnionTown to pay $17-million over one year to earn a 75-per-cent interest. The company's financial statements show that it will have to raise some money to complete the deal. UnionTown's most recent balance sheet, dated Jan. 31, 2011, lists just $157 in cash and no other assets. (In spite of the meagre bank account, the company has a $291.72-million market capitalization, based on 214.5 million shares outstanding and a $1.35 price before the halt.)

Fuelling the promotion has been a series of paid tout sheets, written by Beacon Equity and two other tout services, Stock Market Life and American Energy Report. One tout, issued on May 5 by American Energy Report, predicted an $8 price for UnionTown (which would amount to a $1.7-billion market capitalization). Another, issued by Stock Market Life, said the company had a "crown jewel" of a property in Darby. The reports list varying amounts of compensation from undisclosed third parties, with Stock Market Life saying it received $1.1-million and American Energy Report saying it received $2.5-million.

UnionTown, for its part, denies having anything to do with the tout sheets. A call to the company's phone number, which is in Nevada, was returned by Vancouver promoter Patrick Smyth. He told Stockwatch that the company was aware of the tout sheets, but had no idea who was behind then. "I read the same disclosure you do," he said.

When asked about UnionTown's seemingly high market capitalization, he contended that the company's estimated reserves justify the value. Moreover, the company's acquisition of the Darby property "represents a very good price," he said. Mr. Smyth speculated that the SEC may be concerned with UnionTown's estimated reserves (120 million barrels of oil equivalent at Darby, which would be worth roughly $12-billion at current oil prices). He claimed that UnionTown has a report that supports the figure, and that the company intends to send the report to the SEC.

UnionTown is the third company involving Mr. Smyth that has had the misfortune of attracting an SEC suspension. On March 13, 2008, the SEC halted L International Inc. and Gaming Transactions Inc., two pink sheets companies for which Mr. Smyth had previously served as a director. The SEC said the companies were part of a hijacking scheme run by Ontario resident Irwin Boock, who stole the identities of inactive public companies and then sold them as shells. The SEC did not accuse Mr. Smyth of any role in the hijackings. (Mr. Boock, who faces a civil suit from the SEC, denies any wrongdoing. The case against him has not yet been resolved.)

While UnionTown lists an address in Nevada, its management looks to have more connections to Vancouver. The company's president is Darren Stevenson, a former employee of Royal Dutch Shell PLC who has worked for UBC and has served as a director for more than one TSX Venture Exchange listing. Also on the board is Al Radford, a director of TSX-V listing Formation Fluid Management Inc.

The SEC's halt of UnionTown will last for 10 business days, or until June 14. Unlike halts in Canada, those issued by the SEC place an onerous burden on brokers wishing to trade the stock even after it resumes. They must keep up-to-date information on the company's financial status and on its insiders. They must also have copies of the company's prospectus, its most recent annual report and any subsequent quarterly reports. In addition, brokers must maintain current information on the company's name, address, state of incorporation, number of shares outstanding, the name of its transfer agent and the nature of its products. Brokers must also know if a price quotation is from another broker or from an insider. They must provide this information to anyone interested in trading the company.

http://www.stockwatch.com/News/Item.aspx?bid=Z-C:*SEC-1848195&symbol=*SEC&news_region=C