Executive Summary

Q2 2017 delivered revenue of $4.44M and net income of $1.18M, with gross margin expanding to an estimated ~59% versus ~30% in Q2 2016; revenue rose ~11% sequentially from Q1’s $4.02M while net income more than doubled year over year from $0.44M .
Operating income stepped up to $1.11M from $0.25M in Q1, driven by materially lower cost of sales; net income margin rose to ~27% versus ~6% in Q1 and ~8% in Q2 2016 .
Liquidity and capital structure improved: the company retired two convertible notes ($44,887) and the related derivative liability (~$65,550), and entered a $1.0M revolving line of credit with the CEO at 8% simple interest (plus a 15,000,000-share warrant at $0.05) .
Commercial catalyst: signed a 12‑month sale agreement to deliver ~40,000 barrels per month to Ghana National Power Plant, supporting near-term volume visibility .

What Went Well and What Went Wrong

What Went Well

Margin mix and cost discipline: gross profit increased to $2.63M in Q2 2017 (vs. $1.60M in Q2 2016) as cost of sales fell to $1.81M (vs. $3.73M YoY), lifting operating income to $1.11M and net income to $1.18M .
Revenue composition pivot: 6M 2017 “Hires-Freights & Others” climbed to $2.38M (vs. $0.71M 6M 2016), while crude oil gross sales grew to $5.52M (vs. $4.81M), underpinning profitability .
Management tone on outlook: “Management believes that the sales trends for the remainder of Calendar 2017 will trend comparably when compared to our results for the first six months of 2017 and the year ended December 31, 2016.” .

What Went Wrong

Operating expense pressure: Q2 operating expenses rose to $1.52M (vs. $1.23M YoY), reflecting higher administrative, legal and accounting costs in the U.S. .
Control environment: disclosure controls and procedures were reported “not effective” due to inherent weaknesses from limited personnel/segregation of duties, both in Q2 and the prior quarter .
Related-party financing reliance: current liabilities include $371,545 due to the CEO and the new $1.0M LOC is with the CEO, including a large warrant—highlighting governance and financing concentration risk .

Financial Results

Metric	Q2 2016	Q1 2017	Q2 2017
Revenue ($USD)	$5,327,888	$4,019,113	$4,443,072
Cost of Sales ($USD)	$3,730,637	$2,274,585	$1,814,271
Gross Profit ($USD)	$1,597,251	$1,744,528	$2,628,801
Operating Expenses ($USD)	$1,233,329	$1,492,789	$1,516,859
Operating Income ($USD)	$363,922	$251,739	$1,111,942
Other Income (Expense), net ($USD)	$89,816	$1,105	$66,657
Net Income ($USD)	$437,038	$252,844	$1,178,599
EPS ($USD)	$0.00	$0.002	$0.00
Gross Margin %	29.9% (calc; 1,597,251/5,327,888)	43.4% (calc; 1,744,528/4,019,113)	59.2% (calc; 2,628,801/4,443,072)
Operating Margin %	6.8% (calc; 363,922/5,327,888)	6.3% (calc; 251,739/4,019,113)	25.0% (calc; 1,111,942/4,443,072)
Net Margin %	8.2% (calc; 437,038/5,327,888)	6.3% (calc; 252,844/4,019,113)	26.6% (calc; 1,178,599/4,443,072)

Segment reporting: Company operates in one segment (oil trading and logistics); detailed segment breakdown not applicable .

Revenue composition (Year-to-Date, 6M 2016 → 6M 2017):

Revenue Category	6M 2016	6M 2017
Crude oil gross sales ($USD)	$4,807,452	$5,515,285
Gas oil gross sales ($USD)	$5,627,000	$570,000
Hires-Freights & Others ($USD)	$712,220	$2,376,900
Total Revenues ($USD)	$11,146,672	$8,462,185

KPIs and balance sheet (oldest → newest):

KPI	Q3 2016	Q1 2017	Q2 2017
Cash and Cash Equivalents ($USD)	$139,717	$629,115	$831,211
Accounts Receivable ($USD)	$2,534,327	$3,049,711	$4,405,423
Working Capital ($USD)	~$3,481,882 (calc; $4,044,745-$562,863)	~$3,801,435 (calc; $4,371,067-$569,632)	~$4,955,465
Due to Officer/Related Party ($USD)	$136,600	$208,500	$371,545
Convertible Notes ($USD)	$44,887	$44,887	$0 (retired July 3, 2017)
Derivative Liability ($USD)	$69,154	$65,499	$0 (retired)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2017	None provided	Management expects sales trends to be comparable to 1H 2017 and FY 2016	Maintained qualitative outlook
Margins	FY 2017	None provided	No formal guidance disclosed	N/A
OpEx	FY 2017	None provided	No formal guidance; noted higher U.S. admin/legal/accounting costs	N/A
Capital/Financing	Next 12 months	Informal advances from CEO	Formalized $1.0M revolving LOC at 8% interest; 6‑month interest payments, 12‑month evergreen renewal option	Raised access to liquidity

Earnings Call Themes & Trends

No earnings call transcript was found for Q2 2017.

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q2 2017)	Trend
Supply chain & fleet ops	Shipping & handling costs were a significant component; fleet managed via Petronav; Q3 2016 shipping costs $0.65M and OPEX elevated	6M 2017 shipping & vessels OPEX $1.25M vs $2.02M in 6M 2016	Improving OPEX efficiency
Regional trends (West Africa/Ghana)	Focus on Ghana refineries; West Africa routes	New sale agreement with Sage Petroleum: 40,000 barrels/month for 12 months to Ghana National Power Plant	Expanding commercial pipeline
Regulatory/controls	Disclosure controls “not effective” due to limited personnel/segregation of duties in Q1	Controls still “not effective” in Q2	Unchanged risk
Liquidity & financing	Due to officer advances ($208.5K in Q1); convertible notes outstanding	LOC with CEO ($1.0M, 8%); convertible notes and derivative retired	Improved liquidity; related-party exposure persists
Product mix	Q1: revenue down YoY; crude vs gas oil mix shifting	6M shift toward crude and hires/freights; gas oil sharply lower	Margin-accretive mix

Management Commentary

“Management believes that the sales trends for the remainder of Calendar 2017 will trend comparably when compared to our results for the first six months of 2017 and the year ended December 31, 2016.”
“It is the belief of management that the Company’s operations will provide sufficient working capital necessary to support and preserve the integrity of the corporate entity.”
Commercial update: “In May 2017, the company entered into a sale agreement with Sage Petroleum Ltd., … to deliver them 40,000 barrels (5% +/-) every month for the next 12 months…”
Financing terms: the LOC provides “8% simple interest, with a 360‑day year… evergreen renewal… and interest payable in common stock at $0.001 per share, subject to limits,” alongside a warrant for 15,000,000 shares at $0.05 .

Q&A Highlights

No Q2 2017 earnings call or Q&A transcript was available.

Estimates Context

Wall Street consensus estimates via S&P Global were not available for PGAS at the time of this analysis (attempted retrieval returned no CIQ mapping). As a result, no versus‑estimate comparisons can be provided for revenue or EPS for Q2 2017.

Key Takeaways for Investors

Operating leverage and margin mix improved significantly in Q2: revenue up ~11% q/q and net income up >2.5x y/y, with operating income rising to $1.11M; watch sustainability of the lower cost of sales and mix shift toward hires/freights .
The 12‑month Ghana power plant supply agreement adds near‑term revenue visibility; monitor execution cadence and any potential scale effects on logistics and OPEX .
Balance sheet quality improved: cash rose to $0.83M, working capital to ~$4.96M, and legacy convertible/derivative liabilities were eliminated; however, related‑party financing concentration increased under the CEO LOC (and associated warrant) .
Expense discipline remains a focus: operating expenses increased y/y due to U.S. administrative/legal/accounting costs; maintaining margin gains will require continued OPEX efficiency .
Governance and controls: disclosure controls remain “not effective,” and super‑voting Series A preferred and anti‑takeover provisions centralize voting power; weigh governance risk versus liquidity benefits of insider financing .
Without Street estimates, catalysts will be operational (contract wins, margin/mix improvements, fleet efficiency) and financing (use of LOC, potential warrant exercises) rather than “beats/misses.” Position sizing should reflect liquidity and governance profile .

Additional primary sources reviewed:

8‑K (July 13/21, 2017): Mammoth note repayment; LOC establishment; Series A preferred designation; warrant issuance .
8‑K (June 23, 2017): Officer removal (John Moraites) .
Q1 2017 10‑Q: quarterly financials, controls, related‑party balances .
Q4 2016 10‑Q: prior trend context and operating metrics .

PETROGRESS, INC (PGAS)·Q2 2017 Earnings Summary