Regardless of any lockdown, the AIM small cap industry is operating in full swing, with the usual full torrent of news each day. I'll focus on the more meaningful ones, since the Coronavirus 20% salary deferral by directors announcements are starting to get a little boring. One interesting point though is the number of companies referring to being protected by hedges covering future production. But think about who is ultimately on the other side of these. One example is airlines who buy fuel forwards. They’re looking at paying out hundreds of millions now on these hedges, which is going to add even further to their current troubles.
Back to oil shares, UK Oil & Gas (UKOG) announced a £1.275 million placing at 0.2p. There’s still £2.325 million outstanding on the convertible loan notes, so the share price could be going even lower yet. On the brighter side, they’ve got operating cost at field level down to $12 a barrel and asset-level opex, including tanker export, now equates to $17 a barrel. The oil price is a big damper, but the problem also now is investors not wanting to finance a CEO who they see as having his snout in the trough taking three quarters of a million a year.
Union Jack Oil (UJO) and Reabold Resources (RBD) announced a positive decision from the environment agency in respect of the testing of the West Newton A-2 well. There’s quite a caveat regarding this happening, since they say that testing operations will only recommence once government guidance pertaining to COVID-19 permits, the required personnel and equipment become available, and the health and continued safety of Rathlin employees, contract personnel and the community can be ensured. The same concerns don’t appear to apply to the B site though, where they say they are seeing excellent progress with regards to the initial works.
Failed oil company, Zenith Energy (ZEN) is now trying to jump on the Coronavirus bandwagon. Perhaps they'll eventually realise that you have to know something about a business to succeed in it, but until then I'm sure their PPE will equal their failure in the oil industry. In the meantime, it will be another great excuse for them to raise cash, the actual destination of all of which remains completely unknown.
Instead of sucking it out of them, San Leon Energy (SLE) actually is making money and returning some of it to shareholders in the form of a special dividend of 6p per share. You could have bought SLE for just 11p a month ago. It will still have £59 million left with a lot more expected and they continue to pursue growth opportunities which are prevalent in the current market.
Aminex (AEX) and Solo Oil (SOLO) announced the extension of their Tanzania licence. AEX can now proceed with its farm-out and SOLO can continue to explore its value realisation options. It’s a relief for the shareholders and both companies’ shares are trading around double their price last month.
88 Energy (88E) didn’t take too long to get going again after its recent duster. They’re making an offer for XCD Energy, an oil exploration company with operations on the North Slope, where it holds a 100% working interest in 195,373 acres. This will create an Alaska-focused oil exploration and appraisal company with three project areas: Icewine, Yukon Leases and Peregrine, providing what they say will be an attractive investment proposition for existing and new shareholders. It’s one that will get interesting when it next announces a fully-funded new drill.
That’s it for the meantime and I’ll be back on Sunday with a full blog and podcast covering all the week’s news. I hope you find my comments useful and if you’d like to know further about me, what I write, what I’ve done, what I do and how perhaps I can help you more, visit https://taplink.cc/oilman_jim
Contact me on Twitter @Oilman_Jim
Click “SUBSCRIBE” to receive these blog posts by email
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.