If were looking for potential oil-exploration wealth, there are plenty of candidates around right now, and they span a wide range of market capitalisation. Here are three of different sizes, all of which could have good prospects:
Ophir Energy (LSE: OPHR) is a reasonable size with a valuation of around 1bn, but its share price is down 45% over the past 12 months to 144p, so what is there to fear? Forecasts suggest two years of losses per share for this year and next, so the companys cash position is surely going to be crucial in the short term.
As of 31 December, Ophir had $1.17bn in cash and equivalents in its books which was up on the previous year, and appears adequate for its current drilling programme. Whats more, the firm is cutting costs, while at the same time there is a unique opportunity at the moment to acquire exploration acreage at low cost and with minimal work commitments, in the words of CEO Nick Cooper. He told us the firm had doubled its exploration footprint during 2014 without committing to too much spending over the next few years.
Although the cash is there for now, Ophir is going to have to spend a lot in exploration over the next few years the big question is whether it will find enough oil before it needs more cash.
Next up is the much smaller Sound Oil (LSE: SOU), valued at just 100m and whose share price is up 170% since January! Sure, at 25p the price is still some way below its 2011 peak, but whats been happening?
Well, the Europe- and Mediterranean-focused company has issued a string of releases in recent months with news of its Nervesa gas discovery in Italy and authorisation for the start of operations generating some excitement and it was soon followed by the commencement of drilling.
Better-than-expected results also helped and, judging by the share price, the reaction to the firms plan to raise 12m through a new placing has been positive. Caution is still needed, though, as profit is not here yet, even if forecasts suggest its just around the corner.
Finally we come to Frontera Resources (LSE: FRR), a relative tiddler with a market cap of just 25m(as of close of play 5/5/15) and a share price of a shade under a penny. Frontera was founded in 1996 and explores for oil and gas in Georgia, and is typical of many smaller companies in the industry in still being in the net investment phase with no profits to show yet.
Its actually been producing gas in Georgia for a year now, which is promising, but with no forecasts available and the firm carrying a fair bit of debt (which it has been paying down by the issue of new equity), Id say its impossible to quantify right now. For me, Frontera could go either way and I have no clue which but I hope for success for its shareholders.
Which is best?
To be honest, I could personally do no better with any of these three than tossing a coin. But the Motley Fool’s top analysts have identified a small-cap growth candidate that they think is a lot less risky — it has done well, but they believe it could have a further 45% upside to come!
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.