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Time to punt on 88 Energy?

By Doc Holliday | Thursday 26 November 2015


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


88 Energy (88E) was spawned from Tangiers Petroleum. As with many remakes they are often arguably never as good the second time around however 88 Energy appears to present some classic market mechanic traits of a firm about to do exceptionally well. 

I won't profess to be an expert! In fact I know very little about the intricacies of daily life as an 88 investor (for avoidance of doubt I hold no position) however a classic market move played out on the 24th November 2015 when the company announced it had completed a strongly oversubscribed placing for $3 million. For those of you old enough or stupid enough to follow the Australian markets it's hardly a bundle of laughs out there raising capital for resource companies and similar to hunting white Rhino it's becoming a dying art.  

So what does this move suggest to a mere market mechanic saddo like myself? It smacks of a boys club deal where you know you've had a tidy little down hole event. Surely it can't be that easy, Of course not Shell recently pulled out of Alaska citing titanic risk of icebergs coupled to ever increasing drilling costs within a weakening operating environment and the resource space now is about as popular as a Jim'll fix it medal. 

However the roller coaster of analysis remains true to form as the industry eyes become fixated on major neighbouring assets consistently flagging up higher than expected yields similar to that of Repsol’s Qugruk 8 (Q-8) & Qugruk 301 (Q-301) well reaching rates as high as 4000bopd. Onshore is a very different game to offshore which may explain why the 88 story continues to romance the wandering eyes of the retail world as one of the months most talked about stocks. 

The company has drilling rebate costs of up to 85%, Solid neighbouring hydrocarbon data supporting its their strategy with encouraging signs of thermal maturity within its block. Assuming you caveat the exploration game with the usual risks of '' Almost anything can happen against the rock and roll results from a gusher '' I'd say there is an obvious punt case to be had at current levels although throwing the kitchen sink in just yet wouldn't be advised either. 

However I don't believe for one minute that $3 million flooded in at this stage without prior knowledge or a better than average chance of success. We know that nods and winks run deep and freely within the financial world thus see no reason to doubt things are different here. To be clear theirs a market mechanic flag here just as theirs a technical one worth exploring further, needless to say the marketers on AIM won't be without excitement and 88 Energy appears to have it in abundance.  

Fortunes favour the brave and 88 shall soon reveal its hand. Keep your peckers up. 

 


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Comments

5 comments

  1. Well your piece certainly moved the market .

  2. some are born with gift of the gab. take a top used car salesman and get him to talk up a share and the market shud move. use a guy like turney to talk about a share and the market dont move, you either got it or you dont

  3. I would imagine the David Wall interviews also had some effect as well!
    Still a small punt for me for a bit of fun and holding for results – if it comes off it will be handy, if it doesn’t i won’t lose any sleep over it!

  4. Gazza, ‘’ Asif Wallie had any effect, Don’t you know I move the markets these days ‘’

    Wildes – I see your full of beans

    Vines – You know me only to well

  5. Doc,
    Hopefully see you on Saturday if you’re going?
    Haven’t met David Wall but comes across quite well i think – now he just needs to deliver with the drill.


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