Quiet Christmas week, but still plenty to comment on. Starting with the positives, Petrel Resources (PET) is turning out to be the top performing AIM share of the year. This was highlighted as a favourite many times in the blog around 1p. It's now 19.5p, up 1,850%. There's another one with similar potential in the current issue of the private blog for those who are interested.
UK Oil & Gas (UKOG) announced a HH-1 and HH-2z extended well test update. HH-2z achieved initial rates of up to 1,087 barrels of fluids per day and oil cuts of up to 60%. HH-1 Kimmeridge oil flow was resumed thereafter with an average daily rate of 301 barrels of oil per day. UKOG now aims to shut off formation water ingress in HH-2z and conduct an extended test on both wells simultaneously and try to surpass the psychologically important production number of 1,000 barrels of oil per day. Thereafter, the plan would be to drill up to four more horizontal wells and achieve the maximum production number allowed under the current planning permission of 3,500 barrels of oil per day.
88 Energy (88E) announced all is on track to drill Charlie-1 in the first quarter of 2020 and Empyrean Energy (EME) is progressing its objective to drill its first well in China during 2020. The latter also announced that a £10 million equity placement facility has been secured, but however you dress these things up they're death spirals, so I'd say that for the time being, EME is best avoided.
Reabold Resources (RBD) also issued news, but since it's the festive season I'll refrain from commenting on this, since I don't want to spend the rest of the day dealing with tweets from angry shills and shareholders. Normal coverage of Reabold will resume in the New Year and for those who say I’m wrong about this company, it’s now standing at less than 42% of its year high.
What I'll certainly comment on though is Anglo African Oil & Gas (AAOG), where even its most ardent supporters have now accepted that I was right all along. Latest is that it wants to sell off 80% of its Congo subsidiary to Zenith Energy (ZEN) for £500,000 cash to be paid in six equal monthly instalments, which nicely and conveniently enables the Sefton appointed board members to keep their full salaries until at least mid-2020. (For the sake of completeness, there's also a further £500,000 of eventually to be worthless ZEN shares with sale restrictions.)
Under this deal, ZEN get 80% of the SNPC debt due to AAOG, which currently stands at $5.3 million (c. £4 million), so that’s a return to ZEN of £3.2 million cash for an initial payment of c. £83,000 cash (and a total over 6 months of £500,000, if they pay the rest of it). The justification for this deal is that SNPC won't pay AAOG to whom the money is actually owed, but for some strange, unexplained reason will pay it to ZEN. If AAOG shareholders are stupid enough to believe this and approve the deal (and they may well be), then Sefton, Berwick and the Board get away with it all scot free.
Align Research have an alternative proposal to put to the shareholders: dismiss the Sefton nominees on the Board, appoint Alexander MacDonald (the previous CEO), pursue monies owed to AAOG by Sefton and Berwick's company, ATOG, and carry out a full forensic examination of all the funds spent/transferred out of AAOG by Sefton and Berwick.
I'm not a shareholder, but after the shafting delivered by the existing Board, why continue to vote as they want you to. ZEN and the AAOG Board, who are responsible for this disaster, certainly aren't going get you your money back. All this deal does is get Sefton, Berwick and the AAOG Board off the hook in return for them handing over the last few million pounds of Anglo African shareholders’ funds to Zenith.
Now, if you’re interested in knowing my trading ideas and want to read a more critical assessment of some of these and other companies, then subscribe to the private blog at https://oilnewslondon.com/
For those who are not familiar with me, I focus exclusively on small cap oil and gas companies and I know this sector inside out. I have been involved in the stock markets (both UK and US) since the early 1980s and understand exactly how the finance and promotion game works. I also have many years’ operational and corporate experience in the oil business, which enables me to see very quickly whether or not these companies are telling the truth. It's not investment advice that I offer and if you want that, you should speak with a financial advisor. I share my take on companies and the markets and, as those who follow me know, I’m rarely wrong about these matters.
I'll be back next weekend with a full blog and podcast. In the meantime, I wish everyone all the very best for the New Year 2020.
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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.