Oil dropped into the $20s and we now live in interesting times. In the news so far this week:
Jersey Oil & Gas (JOG) announced it is evaluating with neighbouring field operators a collaborative development of the wider Greater Buchan Area, which contains discovered oil and gas resources in excess of 200 million barrels of oil equivalent. It’s a sensible scheme, endorsed by the Oil & Gas Authority, and JOG has sufficient working capital to keep going through to the end of 2021.
Caspian Sunrise (CASP) decided to suspend all new drilling activities and the Board will defer a significant portion of its salary payments to help bring ongoing costs into line with the income receivable at the reduced world and domestic prices. New wells obviously are uneconomic, even for this low cost producer.
Gulf Keystone Petroleum (GKP) has decided that in view of the impact of Coronavirus on operations, it is "prudent to suspend drilling and certain production facility expansion operations during this time.” Fortunately, they should be capable of riding out the storm with a cash balance of $159 million as at 13 March 2020.
Bahamas Petroleum Company (BPC) announced an expansion of the death spiral financing, but it’s all theoretical, since after an initial small ramp, it went under 2p, the lower limit for conversion. Eventually the board is going to have to face reality here and do a large, heavily discounted placing. What the investor appetite may be for that though at the current oil price is another matter entirely. But the hard fact is that if they don’t drill this year, they lose the licence and perhaps it’s time for them to stop playing games.
Egdon Resources (EDR), Europa Oil & Gas (EOG) and Union Jack Oil (UJO) all announced that their Wressle development project has an estimated break-even oil price of $17.62 per barrel. UJO also re-confirmed that “with in excess of £6.2 million in cash and no debt, Union Jack is funded for all testing and drilling commitments for 2020."
Angus Energy (ANGS) meanwhile is trying to make a positive out of the recommendation by the Planning Officer to decline the Balcombe Oil Field Planning Application by claiming it will reduce cash outflow during calendar 2020 due to forecast capital expenditures at the site. If Balcombe is uneconomic, as it may well be, then the recommendation actually is a hidden bonus for them.
Echo Energy (ECHO) admitted that their Santa Cruz Sur assets are not currently cash flow positive and existing cash resources are not sufficient to sustain operations. I’ve been warning about this one all the way down from 17p and ECHO would have come back to where it is now anyway, regardless of the oil price. The giveaway here right at the start was the initial share structure. It’s only ever been a stock promote.
Nu-Oil & Gas (NUOG) announced that it’s now willing to take on any business that might give the directors an excuse to raise money and keep paying their salaries. Like ECHO had, they’ve also got a lot of stock to shift privately. NUOG halved on the news and I’m not sure whether these type of games are still going to work in the current market.
Overall, further significant damage has been done this week to share prices, some more deserved than others. Many are still overvalued, though, and likely to go lower. I've seen four crashes: 1987, 2000, 2008 and now 2020. This is a bad one, like 1987, and I think that, like then, the poorest companies will lose value entirely.
If you want to know why your shares have collapsed by a much greater percentage than the market generally and probably by a lot more than you think they should have done, the special trading course explains it all. AIM isn't the same as the main markets and, if you're trading without the information contained in the course, then quite frankly you're trading blind. You can find out more about the course at oilnewslondon.com/trading
The great thing, though, is the market never stops and even shortly after the 1987 crash some shares started rising sharply and went up in price many times. Ironically, it's actually easier to find multi-baggers in these type of markets. So don't give in. Take it on the chin, learn the lessons and move forwards - as I did all those years ago. There was a stock market related film came out the same year with the classic line: "I don't throw darts at a board. I bet on sure things." That's really what it's all about and why I'd strongly suggest you read the course I've written.
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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.