It's been a particularly interesting week. Starting with Baron Oil (BOIL) about which I said last weekend the only question was the price of the placing, that question was answered on Friday: 0.1p. Quite a blow for those who believed the social media pumpers' stories of a $300 million takeover and bought it at up to nearly 0.6p. I did warn about what would happen, but on the bright side for those who bought before the ramp at 0.1p and below, the company is now fully funded to drill the El Barco-3x well in Peru later this year.
There’s shades of I3 Energy (I3E) here, where there was a similar stunt by the ill-informed misinterpreting and distorting a RNS announcement back in December. Again I warned about it and again I turned out to be right. Now at a much lower price, I3E issued a corporate update last week, stating it is making good progress in its farm-out process to fund a 2020 appraisal drilling program on its assets in Blocks 13/23c in the UK North Sea. They also denied that the secondary listing is being done in preparation for an imminent equity placing, but did not actually deny that there will be an equity placing. I think that’s probably inevitable.
Predator Oil & Gas (PRD) announced its anticipated placing at 4p per share, significantly lower than its 52 week high of 12.7p. They now have the funds to drill their well onshore Morocco, although it’s disappointing that they weren’t also able to retire the convertible loan note. PRD are now required to publish a prospectus and a clearer picture of this company will emerge once that is done.
Bahamas Petroleum Company (BPC) announced that its Bahamas mutual fund offer has flopped, raising only £700,000 at 2p. The locals were not as stupid as they thought and weren't lured in by the 3p+ price put up in the London market. I suspect a more conventional placing now will be coming up and at a somewhat lower price. They have to drill this year, or they lose the licence, so not much choice.
Another one with a big drill, but fully funded, 88 Energy (88E) announced an operations update. The ice road is more than 80% complete, the drill permit has been issued and spud is anticipated later this month. I highlighted 88E as a favourite several times towards the end of last year around the 0.7p placing price and it's been as high as 1.48p since then. This is an important well: the gross mean prospective resource across the seven stacked targets to be intersected by Charlie-1 is 1.6 billion barrels of oil, 480 million barrels net to 88E.
Tower Resources (TRP) announced a Cameroon operational update. The marine survey vessel completed its work at the well site last Friday and the company's initial view is that the data from the three boreholes are consistent and in line with pre-survey expectations. It all now comes down to whether or not they can negotiate a farm-out. If they do, it flies. If not, then it will have to be a large placing at a low price.
One that’s clear about its need to place is Providence Resources (PVR), which advised that it currently has sufficient working capital to fund it’s costs through to the end of March/ early April 2020. Additional funds will be required to provide sufficient working capital to support the business in the near term. More positive for Providence (and by extension for its partner, Lansdowne Oil & Gas (LOGP), too) was the news that they have recommenced the Barryroe farm-out process and a number of companies are actively assessing the field data. The work programme is expected to include at least two appraisal wells and independent reports of the hydrocarbons recoverable concluded that a mid-case of 346 million barrels of oil equivalent of 2C resources was present. In addition to the discovered resources, the Jurassic formation beneath the field remains un-drilled. Deepening one of the appraisal wells to assess this additional potential deeper in the Barryroe structure is under consideration. PVR could be a great one, but as always it’s down to funding, something that has eluded them to date.
I though it would be hard for a company to be worse than Anglo African Oil & Gas (AAOG), but then along came Zenith Energy (ZEN). There was some serious competition last week from Ascent Resources (AST), which is being “rescued” by James Parsons, and Nostra Terra Oil & Gas (NTOG), where the group wanting to take over is even worse than the current management, but Zenith easily trumps them both. There was so much nonsense from ZEN last week, it would take up most of the blog, so all I’ll say for now is go to SEDAR (https://www.sedar.com), look at the accounts they just filed, whose actual numbers they didn’t even want to include in their 6.29pm Friday night RNS, and ask yourself: what actually happens to all the cash they raise?
Petrel Resources (PET) issued news last week regarding the Tamraz shares and posted a link to a letter from the group. It’s not at all convincing. I keep getting asked about this company and as I explained last weekend, I mentioned Petrel as a favourite around 1p. It then went up over 2,500%. It’s still up 1,000%, but those who bought it at 15p, 20p and 25p remain unhappy. All I can suggest is that they read my blogs in future. You have to get in at, or close to, the ground floor with these things and overcome FOMO (fear of missing out). If you miss it, wait for the next one. You need to control emotions and be patient, because it’s all about getting the timing right.
I mentioned Hurricane Energy (HUR) last weekend too, saying that I had cautioned about it towards the end of last year when it was in the 30s and it was now down to 17p. The decline has continued and it was under 15p this week. Along with FOMO, which I mentioned before, most money that’s lost in the market is by those who think they’re buying bargains, but there’s always a reason why what appears to some to be a "bargain" may not in fact be mis-priced. The saddest thing is people holding on to losers and supporting them like football teams. They then usually lose most or all of their investment. You have to get rid of the losers, not hold them. And forget what you see on social media that purports to be fundamental or technical analysis, most of it is uninformed rubbish.
Fundamental and technical analysis can work with larger companies, but critical with these small caps which constantly require funding is to understand how the finance and promotion side works. That’s why I know what’s going on at these companies and where they’re likely to go. I’ve 40 years experience in the markets from both sides of the fence.
My personal trading philosophy is based upon conviction, elimination of possible loss making trades and only going for those which are certainties. It takes discipline, but it maximises profits, which is what this is all about. I write two blogs. The main blog (and associated podcast) focusses on the news. The private blog focusses on the trades. Writing it all down and publishing it is an excellent discipline, requiring focus and accuracy, since I'm open to criticism if I don't get it right. Writing the main blog ensures staying on top of and correctly assessing all the oil and gas public company news each week. Writing the private blog and sharing my thoughts ensures careful and accurate analysis of the trading ideas. The main blog is free. The private blog costs £95 a month. Some question the cost, but what I can say is that of those who try the £23.75 first month's trial subscription, the vast majority see the value of it and continue at the full monthly rate. The link is https://oilnewslondon.com/subscribe
Contact me on Twitter @Oilman_Jim
Click “SUBSCRIBE” to receive these blog posts by email
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.