Shares of U.S. exploration and production company Torchlight Energy (TRCH) fell a sizable 18% in early trading today. That, however, comes on the heels of a massive 50% or so gain the day before. While it would hardly be appropriate to call this normal price action, it isn't exactly shocking, either.
On Feb. 16 Torchlight Energy announced that one of its lenders had converted $1.5 million worth of debt into 1 million shares of the company's stock. That was a huge move for the exploration and production company because it helped to clean up Torchlight's balance sheet. After the conversion it no longer has any term debt and two projects will have liens removed from them, as they backed the loan that was converted.
So there was some logic behind the big gains Torchlight shares witnessed yesterday. Today, meanwhile, is likely just the logical second step, as the euphoria of good news wanes. Indeed, some investors might have seen the rise as an opportunity to book some profits, a completely logical move, especially given the dramatic gains the day before.
Wall Street is a fickle place and the energy sector has a tendency to be even more variable than most, at times. News about a sector or even a single company can lead to massive price changes. It looks like that's what is going on with Torchlight at the moment. Investors should probably focus more on the company's fundamentals than the roller coaster ride its shares are on right now.