Oil Man Jim Company Oil & Gas Podcast, Mid Week Blog, 29th January 2020

Its share price may continually decline, as I warned it would all the way from 20p down, but Anglo African Oil & Gas (AAOG) continues to issue news, the latest being that they have enough cash to keep going until the end of March.


Who is really in charge at Anglo African is not clear, but with the ISA shares now gone at a fixed price and the convertible loan note financing no longer needed, at least it is possible for the shares to move up. This is a highly questionable company (and I doubt the real control parties have actually changed) but with a new deal in, which seems a strong possibility, it could be back in business. The market remains unimpressed for the meantime though, with the shares at 0.375p, 25% below the 0.5p price paid by the “new” people, who so far are biding their time.

Africa is a nice excuse for Zenith Energy (ZEN) to do yet another raise. Anglo African’s new partner in Tilapia took the opportunity to place again today: this time, nearly £1,000,000 at 1.68p. Whoever listened to those touting it at up to 2.9p recently got shafted. They probably don’t realise they may have been buying shares being sold short, which would then be covered in the lower-priced placing. ZEN is another one I’ve constantly warned about, while others have been promoted it as a so-called “bargain.”

Another investor favourite, Block Energy (BLOE) finally announced its operations update. Gas is being flared, so that has no value currently and they’re still having to truck away water, which appears to be nearly 80% of their production. They don’t exactly try to be clear (quite the opposite in fact), but it appears from what they say that actual oil production is just over 100 barrels of oil per day. They say they’re hitting the ground running as they enter 2020, but what about that 1,000 barrels of oil per day production that the CEO and his promoters were touting last year? It’s the same sort of nonsense as Anglo African Oil & Gas and Zenith Energy and, although the company will have the occasional run-up in its share price, overall and longer-term it’s going the same way – to virtual zero. The control parties don’t exactly have much confidence either since the misleadingly named Georgia Oil and Gas Limited of the British Virgin Islands, which actually is run from Switzerland and who almost certainly would have known the flow rates, sold over 4.5 million shares before the announcement. Every red flag possible is flying here. Block is another one I’ve warned about numerous times. It’s difficult to imagine that some people still see Anglo African, Block Energy and Zenith as serious companies, but they do and lose serious money.

Moving on, Lekoil (LEK) announced that Otakikpo is currently producing 2,122 barrels of oil per day net to LEK’s subsidiary, LOGL. Their expansion project has the potential to increase production on the field up to 8,000 barrels of oil per day net to LOGL, although the subsidiary also carries a term loan debt of $19.2 million at LIBOR + a massive 10%. The big play at LEK is OPL 310, introspect of which $2 million has to be paid on or before 20 March 2020, $7.6 million has to be paid on or before 2 May 2020 and evidence of their ability to fund 42.86% of the costs and expenses for drilling the first OPL 310 appraisal well has to be provided by July 2020. A financing is certainly coming up and I doubt it will just be debt this time.

Developments at Jersey Oil & Gas (JOG), who announced the acquisition of Equinor’s 70% interest in Licence P2170. Payment terms are $3 million upon sanctioning by the Oil & Gas Authority of the Field Development Plan, $5 million upon first oil and an undisclosed royalty. This increases total 2C discovered resources across the Greater Buchan Area to 142 million barrels of oil equivalent net to JOG. They will be launching a farm-out process to attract partners, unfortunately, the market doesn’t appear to be hugely impressed with their news.

UK Oil & Gas (UKOG) announced that they are bringing HH-1 into Production during Spring 2020, followed by HH-2z upon completion of the current extended well test. This will enable recoverable reserves to be allocated to the project, a key first step to help access debt-based funding. HH-2z water shut-off intervention is to proceed in February. In relation to Loxley-1, the planning application will be heard by Surrey County Council at the end of February and, if approved, the Company plans to commence drilling in the winter of 2020/21.

Baron Oil (BOIL) returned from suspension; its reverse take over of SundaGas has been terminated. They still have an entitlement to an effective 25% interest in the Chuditch Petroleum Sharing Contract, offshore Timor-Leste, providing they reimburse their $500,000 share of costs before 26 April 2020. Perhaps of more immediate interest, an experienced local operator with onshore drilling capability has expressed a desire to drill their Peru block, farming-in by contributing a substantial portion of the costs in return for equity in the block. Drilling this well would be a relatively low-cost operation, estimated at $1.4 million (gross) with two independent reservoir targets which would offer shareholders drilling activity during 2020 and the potential for significant additional value on discovery. They also have a 15% share of the Corallian prospects, but apart from Reabold Resources rabbiting on about a huge discovery, I think everyone else accepts that Colter is dead. Currently, I wouldn’t pay too much attention to the talk about the Inner Moray Firth licences either. With £346,000 cash as of 31 December 2019, a fundraising clearly now is imminent.

As a general comment, overall, I see a lot of people in this market making a lot of bad choices and losing a lot of money. Reality is that there around 10 or so what I would call “certainties” each year. If you can stick with those you can make money and quite a lot of it. Unfortunately, most people lack patience. You also need to get in at the start, not later when it’s already up 50-100% or more. If you find out too late and you’ve missed the initial price rise, then just hold back and wait for the next one. That’s how you actually make money in this market.

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For those who are not familiar with me, I focus exclusively on small-cap oil and gas companies and I 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.

I’ll be back at the weekend with a full blog and podcast. In the meantime, I wish everyone a very successful rest of the week.

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The author holds one or more investments in one or more of the companies mentioned so this post cannot be viewed as independent research. This post does not constitute investment advice or a recommendation to buy or sell and may be incorrect or outdated.

No one was paid for this podcast & all views are the authors own.

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