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Déjà Vu at UK Oil & Gas: A Sell

By Lucian Miers | Monday 17 July 2017

Disclosure: The author has a short position in one or more of the shares mentioned. 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.

In April 2015, at Waterloo station I looked up and saw, on a giant television screen streaming live Sky News, the portly figure of colourful Australian share promotor David Lenigas making wild and, as it turned out, unsubstantiated claims about the ‘Gatwick Gusher’, the voguish oil play situated on the Sussex Weald. Instinctively, I reached for my phone and shorted UK Oil & Gas (UKOG) which had trebled to 3p on the excitement.

Since then I have made reasonable amounts selling short Lenigas ramps much beloved by the retail investor (Leni Gas & Oil, Rare Earth Minerals and Inspirit spring to mind).

Shortly after, Lenigas resigned from the board and assumed a role as consultant. On July 6th this year the company announced that 55 million warrants had been exercised at an average of 0.85p. As the company had only 13 million warrants outstanding at the year end and had not announced any further issuance, this seemed a bit odd.

Enquiries to the feckless NOMAD, WH Ireland, naturally went unanswered. The assumption must be that some or all of these warrants were in fact insider options which have been issued like confetti to directors, former directors and 'consultants' in recent years. Most of these have a fair bit of time value left and the only rational reason to exercise them is to then dump in the market. Lenigas’ protestations on Twitter that he is providing funds here for drilling coffers sounds to me like nonsense.

The good news is that the UK retail investor has a memory span of around two years and is hot to trot again here with claims of great things at the Broadford Bridge licence, near to Horse Hill on the Weald (the ‘Gatwick Gusher’). The shares have trebled again back to over 3p and there is plenty of borrow. I have sold short at 3.1p and expect the shares to revert swiftly to mean just like last time.

This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve shortly and a new shorting piece from Lucian later this week click HERE

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