It was pleasing to see Petrel Resources (PET) end up as a top-performing share of the year, closing on 31 December at 15.5p. PET was highlighted as a favourite in the blog several times last year around 1p.
The New Year has got off to an interesting start. I3 Energy (I3E) announced a corporate and funding update: it’s now preparing for a mid-2020 appraisal programme to delineate the fields which the Company believes could contain more than 600 million barrels of oil in place P50. It says that it is simultaneously conducting a farm-down process of its licences to potentially fund the 2020 drilling campaign and will continue working with its senior lenders on a development facility for its assets. Important to remember that future drilling remains entirely subject to funding, which may not be as forthcoming and on as attractive terms as last time. Unfortunately, a lot of investors (institutional and retail) don’t trust this company anymore.
On the bright side, 88 Energy (88E) which I listed as a favourite recently (and I list very few as that), started the year trading up around 100%.
Eco Atlantic Oil & Gas (ECO) issued an announcement noting the recent news from Tullow Oil (TLW) regarding the light oil discovery made at the Carapa-1 well, offshore Guyana. Testing indicated that the oil is 27 degrees API, with a sulphur content of less than 1%. ECO is another blog favourite that gained more than 100% last year, but then collapsed when it turned out that their oil was heavy. I did say that the upward share price movement had run out of steam before that happened, but since then it appears the CEO knew about the issue and said nothing while he was actively promoting investment in the company. A lot of investor trust has been lost here sadly and the shine has rather gone off ECO.
Lekoil (LEK) issued a strong announcement. It has secured $184 million funding from the Qatar Investment Authority for the appraisal drilling and initial development programme on the Ogo field within OPL 310. Currently 9.5p (up from 4.65p at the time of the announcement), Hannam & Partners have calculated a risked NAV of 23p a share and an un-risked NAV of 239p a share.
Pantheon Resources (PANR) never ceases to surprise. This £83 million market cap company has been suspended from trading due to its failure to publish its accounts on time. The auditors are now requiring a third-party report to independently confirm the directors estimates of recoverable oil before they will sign off. I wonder why.
The soap opera continues at Anglo African Oil & Gas (AAOG) with the war of words between Align Research/Jub Capital and Zenith Energy (ZEN)‘s social media representatives escalating. Looking at matters pragmatically, the ZEN proposal sucks virtually all the value out of the company, leaving just enough cash to pay the directors’ salaries until AAOG probably delists in six months time and the share value goes to zero. The Align Research/Jub Capital proposal, due to the promotional capacity of the parties and the structure of their deal, offers the possibility of significant share price appreciation. Unfortunately, the directors do not appear to be considering stock market realities and perhaps are more focussed on their own personal liability. They’re also not particularly aligned with the shareholders since, very wisely, like Sefton and Berwick before them, neither the CEO nor the Chair own any shares at all.
The people who’ve always got hurt with this (and hurt very badly) are those who believe that Tilapia has value. Based upon the information released by the company and other information in the public domain, I view Tilapia as worthless. As readers of the blog know, I’ve held this view for some time, all the way down from much higher prices. If the project was real, SNPC would have been happy to pay their share. If the project was real, they would have completed in the Mengo and now be producing. If the project was real, Sefton and Berwick would have done that last year, instead of the absurd charade over a never to be completed CPR. The whole carry on was nothing short of embarrassing and an insult to the intelligence of anyone with even the most basic understanding.
There are no real oil companies interested in Tilapia and the reality of the situation is harshly illustrated by the fact that in terms of actual cash on the table now for Anglo African, Zenith have offered £83,333 and Align Research/Jub Capital have offered £100,000. Reality is, an actual oil company could put together a “killer proposal” with an upfront cash offer of £125,000 and take this out now if they wanted it. But none of them do. If I was a shareholder, it’s a no brainer: reject the ZEN offer and push the board to do a deal which most benefits those to whom they have a fiduciary responsibility. The reality is though that ZEN will probably win, since the board will vote the 22% owned by Riverfort and YAII in favour of the deal, but the legality of the issue of over a hundred million shares de facto at less than nominal value to provide votes for themselves is something I see there being quite an argument about. In reality, these shares that the board is going to vote have not even been paid for.
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For those who are not familiar with me, I focus exclusively on small cap oil and gas companies and know this sector inside out. I have been involved in the stock markets (both UK and US) since the early 1980s and understand exactly how the finance and promotion game works. I also have many years’ operational and corporate experience in the oil business, which enables me to see very quickly whether or not these companies are telling the truth. It’s not investment advice that I offer and if you want that, you should speak with a financial advisor. I share my take on companies and the markets and, as those who follow me know, I’m rarely wrong about these matters.”
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