I know it can all look gloomy, but actually it's not. The number one on the private blog list rose over 100% in the last 8 trading days. It all just depends upon which shares you're in. On to the news, I3 Energy (I3E) entered into an option agreement to acquire Toscana, a Canadian company producing around 1,000 barrels of oil equivalent per day. They say that the average breakeven price is $21.74 per barrel of oil equivalent, but what they don't disclose is that this oil sells for well below US prices. It's a dog of a deal and I3E now has squandered its cash buying Toscana's defaulted debt, while it’s own debt remains outstanding.
Nostrum Oil & Gas (NOG) is finding itself in a difficult situation too. Per its announcement this week, they recognise the precarious liquidity position of the company and will therefore look to engage with their bondholders. They’ve also got a 272 million barrel of oil equivalent reserve downgrade, which will lead to a significant impairment being taken when they release their full year results. JKX Oil & Gas (JKX) reported its 2019 financial results, but they’re academic now and unfortunately when it came to the outlook for 2020, rather than providing any hard information, they chose just to waffle.
UK Oil & Gas (UKOG) also issued financial results. They say that once they fully implement the cost reduction measures, Horse Hill will be well protected from low oil prices. Horse Hill also stands to benefit significantly from high oil prices, as, following their operating cost reductions, the production costs per barrel are forecast to be significantly below those of their UK competitors. The cost reductions should enable Horse Hill to at least break even at low Brent prices. But I’m not sure how appropriate the £310,000 bonus for Stephen Sanderson is in the current environment.
Not major news, but it’s good for shareholders to know that Union Jack Oil (UJO) and Egdon Resources (EDR)'s Biscathorpe development offers commercial upside with break-even full-cycle economics estimated to be $18.07 per barrel of oil. And, unlike I3E in Alberta and others operating in the middle of nowhere, in the UK a normal world market oil price still can be obtained; in some other places now it’s just a few dollars a barrel.
Meanwhile, Europa Oil & Gas (EOG), also active onshore UK, has completed a comprehensive review and cost reduction programme and their existing cash reserves are expected to be sufficient to finance current and upcoming activity without the need for additional external funding. It’s not really that encouraging, but there we are.
Tower Resources (TRP) finds itself delayed by the Coronavirus. They've notified the Ministry of a force majeure event to obtain more time, but overall the situation doesn't sound great. It's a project that's at the margin and I wouldn't be too confident that it will proceed. Directors took 0.2p warrants in lieu of fees, though, but why not, since it’s better than nothing.
The Predator Oil & Gas (PRD) Morocco drill isn’t happening either. Usual Coronavirus excuses and they’re now talking about using the funds for acquisitions. In the meantime, they confirmed that the Trinidad project economics (in partnership with Columbus Energy Resources (CERP)) are still attractive even at West Texas Intermediate $20 a barrel.
Caspian Sunrise (CASP) announced the successful perforation of New Well 150, which is flowing at the rate of approximately 500 barrels of oil per day using a 7 mm choke. The infill drilling programme now is being suspended, as will work on the deep wells in a few weeks time. It's a company that has its followers, but now perhaps is the wrong time.
Finances are getting tight for Empyrean Energy (EME). It currently has sufficient working capital to the end of April 2020, but will need additional funding to enable it to satisfy its share of final costs in relation to the drilling of the Tambak wells last year and to provide sufficient working capital beyond that date. The board is currently reviewing a number of funding alternatives, including (but not limited to) drawing a portion of the Longstate Facility, an equity placement or undertaking an Open Offer to existing shareholders. Doesn’t sound like one to buy now either.
Meanwhile, the boardroom row at Nostra Terra Oil & Gas (NTOG) has flared back up and a new requisition to convene a general meeting has been received with a new resolution to remove Matt Lofgran as a director of the company. All quite pointless really since the assets now must be more or less worthless and no matter how bad Lofgran may be, I don't see who they've got to propose that's any better. It's all really about someone else trying to nick his £250,000 a year salary. They'll never be anything in it for the shareholders here. Same applies to Mosman Oil & Gas (MSMN), which reported a loss from ordinary activities of $4.3 million. It’s an equally pointless company that exists only to profit its directors and connected parties.
In the same category, Zenith Energy (ZEN) announced a letter of intent for a "premium placing" at 2.5p. For those who want to fully understand these things (and learn how actually to profit from small caps) these type of tricks (and all the others) are explained in the Special Trading Course. Link for that is: https://www.oilnewslondon.com/trading
Back to more viable companies, 88 Energy (88E) issued an operations update. Total depth of 11,112 feet now has been reached in the Kuparuk Formation and logging while drilling results were largely consistent with Malguk-1. Wireline logging now is underway and is expected to take around seven days. Premier Oil (PMO) is the majority partner in this venture.
Moving on, what I'd warn everyone is most money that’s lost in these markets is by those who think they’re buying bargains. Normal fundamental and technical analysis doesn't work on AIM. 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