It was a busy week, with a number of interesting announcements. After a suspension in Australia, 88 Energy (88E) completed a £2.6 million placing at 1.1p. They also confirmed earlier in the week that Charlie-1 is proceeding as planned ahead of the scheduled February 2020 spud date, permitting of the Yukon acreage is underway ahead of potential drilling in 2021, subject to farm-out, and the JV partners plan to conduct a formal farm-out process to fund further appraisal of Project Icewine Unconventional. Notwithstanding the 1.1p placing, the share price remained relatively resilient, trading around 1.3p, substantially above the previous 0.7p placing price around which I mentioned it as a favourite several times towards the end of last year.
88E’s previous drilling partner, Red Emperor Resources (RMP) issued its quarterly report. RMP continued to conduct due diligence on a number of potential projects and, at the end of the quarter, had cash of approximately A$5.1 million. It’s too early to say anything yet, and regardless of the project, it will undoubtedly need to raise more cash, but it could be a good one for trading with another fully-financed, big number drill in it.
With the share price continually declining, as I constantly warned it would, Anglo African Oil & Gas (AAOG) continued to issue news. From a corporate governance point of view, Anglo African is a disgrace. The board voted and has now directed the sale of a control block, issued for no cash and de facto at below the nominal share price, to what appears to be a friendly party at less than another competing third party offer. Who is really in change at Anglo African is not clear, but covering up appears to be the main priority. As I've said before, everything can change with one RNS though and what's important about their latest news is that the ISA shares are gone at a fixed price, rather than being sold down to virtually zero by Riverfort and YAII, plus they may no longer need the convertible loan note financing. This is important, because now it is at least possible for the shares to move up. This is a dog (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 with the shares at 0.375p, 25% below the 0.5p price paid by the "new" people, who I guess are hoping that this dog will have its day.
Touchstone Exploration (TXP) issued a strong announcement regarding their Cascadura-1ST1 well, onshore Trinidad. They encountered significant pressures and natural gas volumes while evaluating a potential oil zone, as a result of which they suspended testing to bring in the appropriate equipment to measure high volumes of both natural gas and liquids. Meanwhile, they're surveying the pipeline route for the previously announced Coho-1 natural gas discovery and have commenced civil work on the access roads to the next two planned exploration prospects.
Europa Oil & Gas (EOG) announced that the major oil company, with whom it has been negotiating, has pulled out. Europa now is looking for another partner to drill its Inishkea prospect, which has gross un-risked prospective resources of 1.5 trillion cubic feet of gas and an estimated geological chance of success of one in three. In the meantime, Europa is advancing the site survey process for a drilling location at Inishkea and hopes to obtain permission for the survey to be conducted during summer 2020, which would enable drilling to occur during 2021.
Meanwhile, Egdon Resources (EDR) issued a more positive announcement. They've signed a farm-in agreement with Shell UK in relation to their offshore licences containing the Resolution and Endeavour discoveries. Shell will acquire a 70% interest and pay 85% of seismic costs up to $5 million plus 100% of all studies and manpower costs up to a well investment decision. It's not the best of terms for EDR, but they were over a barrel and from personal experience I know Shell negotiate hard. Nevertheless, Egdon bring in a serious partner and validate the merits of the licences.
Pantheon Resources (PANR), currently suspended for failing to file their accounts on time, announced a report confirming a contingent resource of 76.5 million barrels of recoverable oil. They say that their farm-out process remains underway with a number of groups having entered the data room and with a number of others having expressed interest in entering the data room in the future. It doesn’t really sound very promising. Anyway, following receipt of the contingent resource statement, which their auditors insisted upon, they’re “targeting” publication of the financial results and hope to return to trading next month.
Lekoil (LEK) appear to have managed a reprieve. Obligations to Optimum Petroleum have been deferred, so that $2 million now is to be paid on or before 20 March 2020, $7.6 million is 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 is to be provided by July 2020. So it's back to raising finance again. The challenge they have though is that financing deals like the supposed Qatari one don't exist in the real world.
Petrel Resources (PET) looks like it could be having middle-Eastern financing issues too, but the wily old John Teeling looks like he may have the chancers by the short and curlies, having obtained an injunction blocking all trading in the shares issued to this group. The way this stock now trades, it appears there may be substantial short positions in the market. If so, the PET share price could rocket. I highlighted Petrel as a favourite several times last year around 1p and it subsequently hit 26.5p. It went down as low as 3.85p on Monday last week and back up as high as 14.85p on Friday. What can be said with certainty here is that extreme volatility will continue.
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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 next weekend and, in the meantime, I wish everyone a very successful 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.