Stock market and oil prices gave back some of their recent gains last week, with plenty of uncertainty still remaining on the international macroeconomic front due to virus related demand concerns. Domestically, the main issues now are Coronavirus and its economic impact, Brexit and the “no deal” possibility which will soon come into focus, plus whatever the BLM protests and counter protests might turn into over a long, hot summer. It all makes for interesting (and potentially dangerous) times.
Moving on, there were a couple of grumbles last weekend regarding negative coverage of companies. Just to clarify, these blogs and associated podcasts cover the news being issued by the more speculative oil and gas companies each week. Some issue good news, some issue mediocre news, some issue bad news, and some pretend that their bad news is good. It’s different to the other blogs and podcasts, because I don’t accept compensation from the companies, so I can say it as it is and I don’t pretend news is exciting or positive when it isn’t. I’m genuinely independent and simply state the truth as I see it. I’m rarely wrong.
I’m sorry if anyone doesn’t like my commentary, but it’s the reality of the news which the companies issue. If you’re looking for solace, there are plenty of other commentators retained by these companies to soothe your financial pain. But you’ll only ever succeed in the markets if you can handle the type of uncomfortable truths that I provide and adjust your approach accordingly.
I know about this stuff, because I’ve been deeply involved in the small cap speculative markets since the early 1980s, both in the UK and the US. I understand exactly what everyone is doing and precisely what their agendas are. My particular focus is on the oil and gas industry, where I have significant experience, but I also understand fully how the game is played in all the other sectors, whether it’s mining, pharmaceuticals, technology, or any other area. The modus operandi with all of them is just the same.
On to the company news, Union Jack Oil (UJO) announced the acquisition of an additional interest in the Wressle project. It’s buying a further 12.5% for £500,000. Most importantly, because it’s only maintaining this current market capitalisation due to the upcoming West Newton drill, Union Jack says it "remains in a strong financial position with current cash reserves in excess of £5.5m and fully funded for its existing drilling, testing and development commitments on all of its projects during 2020.” Among other small cap companies with UK interests, Angus Energy (ANGS) announced that prior approval has been obtained for the installation of processing facilities at the Saltfleetby 'B' site, Egdon Resources (EDR) announced approval by the Oil & Gas Authority of their farm out to Shell and Europa Oil & Gas (EOG) announced the acquisition of a further offshore Ireland licence.
A busy week for Bahamas Petroleum Company (BPC), which announced both the award of a petroleum licence offshore Uruguay and the acquisition of Columbus Energy Resources (CERP) in an all share merger. The latter was not received well by the market and the share prices of both fell sharply. It’s looking more and more like the Bahamas drill may be purely promotional. Regarding Columbus, it’s fascinating that VSA Capital was saying to retail clients that it was worth over 20p, yet when it came to the crunch, they were happy to advise the CERP directors that tuppence a share was fair and reasonable. You see why I sometimes can be cynical.
Hurricane Energy (HUR) announced the departure of founder, Dr. Robert Trice. It’s a sorry saga for those investors who believed, but you see this so often, with the share price ending up lower than it was before the initial drilling "success." It’s one reason I believe these types of shares really are only for buying and selling over a timeframe of a few months and not for holding longer-term.
As I said it would, PetroTal (PTAL) announced a placing. It’s raising £14.1 million at 10p, with warrants attached. It’s far from out of the woods yet though. The contingent liability to Petroperu was approximately $43 million at end May and the production facilities at Bretana are having to be pledged to Petroperu in respect of that, plus there are further obligations to suppliers of approximately $49 million, excluding the contingent liability. It does still have its fans, the very ones who were vehemently denying the existence of the supplier liabilities until last week. Next foul up by management, I guess Petroperu just takes the the field from them under the pledge.
Full year results were announced by Tower Resources (TRP) (loss of $2.7 million), Reabold Resources (RBD) (loss of £4.3 million) and Echo Energy (ECHO) (loss of $13.5 million) with nothing exciting in them. Managements of this trio have all lost their shareholders substantial amounts in recent years. These, however, are relatively serious companies compared to Nostra Terra Oil & Gas (NTOG), which announced an operational and corporate update. After years of supposed effort and millions upon millions raised to finance the oil and gas equivalent of a corner shop, which every other operator in the area can somehow make a good living out of, NTOG still can’t even pay its overheads. Same as others, it’s just an endless share price decline, with financings at ever lower levels. To cap it all though, Anglo African Oil & Gas (AAOG) entered into another death spiral financing to pay their directors’ salaries. It doesn’t even have a business to provide hope to its shareholders. Are these the sort of companies you want to invest in?
There are always a few good ones, but most are not and, even with the good ones, there’s only a relatively short window of opportunity in which gains can be made. Understanding this is what it’s all about. It’s no good being stuck in losers and supporting them tribally, watching your money drain away. You need to get out of them, get into those with actual immediate potential and make sure to turn your paper profits into cash while they’re still there. I’ve written a 10 part trading course, which explains everything for those who want to understand how these companies and markets actually work and how to make money out of them. Details are at https://www.oilnewslondon.com/course I also write a private blog each week covering my actual trading ideas and other matters. Details of that are at https://www.oilnewslondon.com/subscribe
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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.