The lower they go, the harder they bounce and there’s still good money to be made, even in (perhaps because of) such markets. Just look at some of the movements between the previous Friday and last Wednesday. For those using CFDs and spread bets, there were 100% gains possible even just with retail leverage.
On the news front, the usual mixture, but I sense that with the current conditions, companies are holding the good ones back and I expect to see more this coming week.
88 Energy (88E) announced that Charlie-1 appraisal well drilling has commenced. They say they’re "optimistic that success is just around the corner." This is a credible drill since Premier Oil (PMO) has farmed in, and a big one targeting 1.6 billion barrels of oil with 480 million barrels net to 88E. There are seven stacked targets and multiple oil and gas show announcements are highly likely. I highlighted this as a favourite several times around 0.7p in the blog and it's now 1.075p, having been nearly as high as 1.5p.
Among the less credible projects, Angus Energy (ANGS) announced a CPR for the Saltfleetby gas field, touting reserves of 16 billion cubic feet of gas which will, they claim, generate a total cash flow after costs of approximately £50 million. I think it’s worth remembering that the party who "sold" them the Saltfleetby gas field viewed it as such "a gem of an asset" (as Angus describe it) that they paid them £2.5 million to take it off their hands.
Lekoil (LEK) announced the results of their internal investigation into the OPL 310 facility agreement. All the directors are, of course, exonerated, although the company was the principal beneficiary of the fraud, seeing its share price rocket up on huge volume to 11p, allowing large shareholders to sell at higher prices. Blame is placed upon the external advisors. Regardless of the rights and wrongs here, though, LEK has some interesting news coming up and now down to 2.4p, it’s one to keep an eye on.
SDX Energy (SDX) announced that their play-opening BMK-1 well in Morocco encountered commercial quantities of gas in both target horizons. The rig now moves to drill the potentially play-opening LMS-2 well. Predator Oil & Gas (PRD) also announced approval of the environmental impact assessment for their upcoming Morocco well. The shares are well under their 4p placing price with large numbers to be flipped and it’s amusing to see the CEO already starting to talk about someone acquiring the company. It’s worth bearing in mind, though, that PRD will be covered to convert the outstanding convertible loan into shares down to 1.5p.
One thing this correction has done is inject a much needed dose of reality into the oil and gas small cap market. For those who are puzzled about some of the larger falls in the share prices of what they consider to be “good companies,” there usually are good reasons for these. For example, PetroTal (PTAL), which I frequently get asked about, where what I think many perhaps do not realise yet is that the company’s 2020 capital program only is fully funded on the basis of a Brent oil price over $60 per barrel. The same oil price issue applies to many other companies’ projects too.
Back to the news, Solo Oil (SOLO) announced a transaction update and restoration of trading. The transaction with ONE-Dyas has fallen through and they're now looking to sell their Tanzania assets to pursue acquisitions within the European gas market. They're currently in discussions with several separate vendors. At 0.95p and a £6 million market cap, there could be potential.
Nostra Terra Oil & Gas (NTOG) and Zenith Energy (ZEN) issued their announcements. The NTOG board room drama has been brought to a close with Andy Morrison becoming Chairman and Ewen Ainsworth stepping down. It doesn't change the nature of the extremely poor assets one little bit though and losses for shareholders plus high salaries for directors will continue as normal. Any new deal the new directors bring in will just require even more funding. In the meantime, ZEN has lost its "flagship" Azerbaijan licence and they're trying to compensate with talk about a possible acquisition in Tunisia. In the meantime, all I can do is suggest that bondholders and shareholders take time to check out their latest accounts. Reality of course is none of them will do that, which is of course why they all continually lose money. I’ve been calling NTOG and ZEN down for some considerable time and, within just the last year, both of their share prices have collapsed by around 80%. Remarkably, these and other similar companies continue to have their fans, the question of course is are they just stupid - or compensated? Meanwhile, the ex-Nostra Terra Ewen Ainsworth stepped up, along with the ex-Sound Energy James Parsons, as new directors of Ascent Resources (AST), both having passed the “necessary regulatory due diligence” checks, however low they may be. The merry-go-round of failed AIM company directors continues to turn.
On a brighter note, Tower Resources (TRP) announced a Cameroon farm-out update. Half the well costs are now covered and other half is under discussion, with the company confident. Let’s see if the private company they’ve farmed-out to has the money though. They’ve got until the 29th of this month to prove it.
As regular readers and listeners will know, I also write a private blog available by subscription, which focusses on my actual trade ideas. Details of that can be found at https://www.oilnewslondon.com/oilman-jim In addition, I’ve now compiled a trading course, which vastly expands on some of the principles I expound here and provides information that most will never have heard before.
There are many books and courses on investing and trading, but hardly any that address the actual peculiarities of the speculative small cap markets. The few that do exist deal with the North American markets, which operate in quite different ways to the UK. What does exist is quite useless for AIM and the London small cap market.
Investment techniques which are suitable for main markets and large companies are not appropriate to AIM and most of those that try to apply them lose, and often a lot. It's a completely different game. There’s virtually no genuinely beneficial information out there about trading AIM and small cap companies. Hence I’ve decided to write this course.
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I’ve been involved in the markets for a long time. I bought my first shares in the 1970s and I’ve worked in the financial sector since the early 1980s. My particular knowledge is of the stock markets and I’ve been actively involved in these, both in the UK and the US for over 40 years from both sides of the fence. I’ve also had significant involvement in the oil and gas industry along the way, from drilling wells to negotiating farm-outs to majors.
Small cap speculative companies exist to enrich their insiders, not their public investors, and everything those involved do is for their benefit, not yours. The vast majority lose with these companies, but for the whole scheme to work, some have to profit and you can be one of those too. The link is https://www.oilnewslondon.com/trading
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The author may hold 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.