andrew..your question is a good one and needs some further discussion.
A company that trades it's stock on the open market is subject to the whims and perception of investors...
In other words.... the companies actual earnings, growth rate, and future projected success do not necessarily get reflected in the share price of the company stock, they may be over valued, undervalued or ignored by investors completely because of the sector they are in or the risk factor.
With companies out of China right now there is a question of ethics, Chinese culture says do it my way or forget it, that is not going to work on the US public markets because there are rules that must be adhered to. The second problem is verification of business plan, it's not like these guys can be monitored like the number of sales at the local 7-11. They are outside the country and variables come into play that some investors find too risky to invest in therefore the sentiment on the companies stock price is neutral/negative causing a lack of volume on the stocks buy side which causes a softening in the share price... even though the company itself is growing if investors do not believe or find the risk too high then the share price is undervalued to the actual fair value of the company.
As far as fossil fuel companies go, all you have is the word of the company if they are in China, where as US or Canadian companies must show probable/proven reserves through independently verified seismic studies, thus lowering the risk factor for investors.
Probably the center of scams in the oil and gas industry will be the stories coming out of Russia and the Baltic's over the next couple of years. Much like Canadian mining companies were a few years ago before the Canadian Gov't required all mining companies to produce the NI-43-101 document (national instrument 43-101) which is an independent verification of the companies claims, therefore lowing the risk factor for investors.
further discussion on topics like this can be found at the Hermits Hovel, the link is in my signature at the bottom.
There is no substitute for conducting your own research
