After years of digging holes in the ground, several small oil and gas companies say they are aiming for a new high.

In the space of a few months, penny stock energy companies such as PetroTech Oil and Gas Inc. (OTC: PTOG), Next Generation Energy Corp. (OTC: NGMC), Garb Oil & Power Corp. (OTC Pink: GARB) and US Natural Gas Corp. (OTC Pink: UNGS) say they are investing in cannabis for medical and/or recreational use.

The idea may seem half-baked, but company officials say the market is expanding.

Regulatory authorities caution that marijuana stock scams abound, especially with companies that aren’t well known, offer little or no financial information and are thinly traded.

Since 1996, 20 states and the District of Columbia have allowed for medical marijuana programs, not including the April 8 passage of Maryland legislation that is awaiting the governor’s signature. Colorado and Washington State have legalized recreational marijuana use.

On April 14, Garb Oil & Power announced that it was creating a new corporate division specifically for the medical marijuana industry.

Tammy Taylor, company CEO and president, said that in February the company announced it would take an active role in the development of human resource guidelines, especially in the manufacturing industry, so the company would be prepared if the Florida voters pass medical marijuana legislation in November.

Taylor told Hart that synergies exist between her company, founded in 1972, and the medical marijuana industry. She said she could not discuss them further, but that announcements would be forthcoming.

Weed To Succeed

Taylor said Garb has discovered several products it may produce for the medical marijuana industry that fit into its business model.

“In light of these developments, Garb has created a new corporate division for the development, manufacturing and sale of products that specifically relate to the medical marijuana industry,” she said.

Garb specializes in waste recycling related to waste-to-energy. The company's emphasis is for its own plants to produce profitable new and “green” solutions for waste-to-energy, alternate energy sources, gas drilling and other endeavors.

Ultimately, Taylor said the goal of the company is to make money for shareholders, although investment by larger oil and gas companies is a case-by-case decision.

“I think it depends on what it is that a particular company is doing,” she said. “I think it’s important that it’s viable, that it makes good business sense.”

Garb is not the first oil and gas firm trying to move from the rock business to the stone zone.

On April 7, US Natural Gas Corp. announced it had gone to seed by initiating operations of a marijuana subsidiary.

The energy exploration company operates in the Appalachian Basin.

Executives told Hart that the company is transitioning into more of a holding company that will be known as Sylios publicly and on the market after approval by the Financial Industry Regulatory Authority (FINRA).

The new Greater Cannabis Company LLC (GCC) will be a wholly-owned subsidiary focused on the medical and recreational marijuana market. The company filed articles of organization on March 20, according to the Florida Division of Corporations.

The UNGS website said Greater Cannabis will focus on the addition of new products through joint ventures and/or acquisitions that cater to this newly expanding field.

As with other companies announcing marijuana initiatives, UNGS said it will continue to work in the natural gas market. The company's subsidiary, now known as US Natural Gas Corp., will maintain day-to-day operations of the natural gas development project in Wayne County, W.Va. The company operates 122 natural gas wells and maintains a leasehold base of about 12,000 acres.

Hemp Temps?

Many various companies have announced moves to incorporate marijuana into their portfolios, and there may be a more sinister method to their madness.

FINRA has issued several marijuana stock scam alerts, most recently noting that new laws went into effect January 2014 regarding the legalization of marijuana for medical and recreational purposes.

As media coverage increased, so did investor interest in shares of marijuana-related companies.

“In some cases, volumes for the stock of otherwise thinly traded, marijuana-related companies increased dramatically—and prices became quite volatile,” FINRA said in an alert posted on their website.

The agency warns of the potential for fraud and the risks of investing in thinly traded companies about which little is known.

“Regardless of industry sector, any so-called ‘hot’ stock can burn your portfolio,” FINRA said.

The Securities and Exchange Commission (SEC), for instance, has taken action against PetroTech Oil and Gas Inc., with assistance from FINRA.

In February, PetroTech said it would leverage its expertise in natural resource development in enhanced oil recovery and launch LP US Management Group Inc.

PetroTech saw gains in its stock before the SEC temporarily suspended the company March 14 because of “questions that have been raised about the accuracy and adequacy of publicly disseminated information” about the company’s operations.

The SEC order does not specify what information was in question.

In a March 21 news release, PetroTech said it “is not aware of any wrongdoing, regulatory investigation, or the specific reason for the trading suspension, apart from the information included in the ‘Order of Suspension of Trading’ issued by the Securities and Exchange Commission on March 14, 2014.”

PetroTech has said it is acquiring warehouse facilities in Telluride, Colo., has growers in Colorado and Washington and has “plans for expansion already formalized.”

A March news release said the company acquired a medical and recreational marijuana license in Colorado, but no records could be found by Hart that matched the company or its associated entities. The company did not return two messages and an email seeking comment.

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