88 Energy Ltd

88 Energy Ltd (LON: 88E) is a FTSE AIM All-Share listed Company involved in oil and gas exploration with assets on the North Slope of Alaska.

Investment Rationale – SPECULATIVE BUY at GBX 1.532

• Turned Profitable with Zero Debt: In H1 FY21, 88E recorded a profit of AU$445,446 against the loss reported last year. The Company also held significant cash position with no debt on the balance sheet.
• Fundraising: On 2 September 2021, 88E raised £12.71 million through the issue of 855,856,369 of ordinary shares at a price of 1.49 pence per share. The net proceeds strengthened the Company’s existing cash reserves to finance the drilling and logging of the Merlin-2 appraisal well.
• Favourable Dynamics: Higher energy prices amid rising input costs and delayed storage facilities can support business in the short-term
• Outperformance: 88E’s stock price has soared over 256% in the past year, reflecting a significant outperformance against the benchmark FTSE AIM All-Share index.
• Technical Indicator: From a technical standpoint, 14-day RSI (~43.92) indicating an oversold scenario, while the stock is hovering around the lower Bollinger Band.

Key Risks

• Demand Uncertainty: As the global demand outlook for energy is unstable due to the Covid-19 mayhem, while there are significant operational challenges. The short-term outlook for the Company looks sceptical.
• Inflation Woes: Higher input costs due to supply chain disruption and labor absenteeism can also hamper the profitability margins.

Recent News:  On 15 October 2021, 88E unveiled a quarterly update for the quarter ended 30 September 2021. It reported that

• Merlin-2 appraisal well planned for Q1 2022.
• Strong financial position with AU$36.1 million in cash and maintained zero debt (as at 30 September 2021).
• The Board and management team was also strengthened.

Interim Results (for the half-year ending 30 June 2021, as on 11 August 2021)

 (Source: Company Website)

• Encouraging Operational Results: 88E completed the drilling of Merlin-1 well at Project Peregrine in March 2021 and received Merlin-1 post well testing program.
• Acquisition: It undertook the acquisition of Umiat oil field and remaining 50% working interest in Project Peregrine to strengthen the portfolio.
• Financial Position: At the end of H1 FY21, the Company held cash of AU$14.8 million with zero debt.

One Year Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group) 

Conclusion 

88E is certainly thrilled with the results from the Merlin-1 exploration well. The Merlin-1 well has confirmed an active petroleum system in the Peregrine acreage. The Group has also undertaken certain acquisitions to generate incremental value for its shareholders and also bolstered the management team. It has also maintained zero debt with substantial cash position to pursue the upcoming market opportunities. The stock made a 52-week High and Low of GBX 4.70 and GBX 0.34, respectively.

Based on the excellent operational results, equity issuance, acquisitions, strengthened balance sheet and management, we have given a “SPECULATIVE BUY” recommendation on 88 Energy Ltd at the current price of GBX 1.532 (as on 11 November 2021, at 8:20 AM GMT).

Wishbone Gold PLC

Wishbone Gold PLC (LON: WSBN) is a FTSE AIM All-Share listed exploration and trading entity, which deals in gold and silver.

Investment Rationale – WATCH at GBX 7.10

• Trading Update: As per the H1 FY21’s results (for the period ended 30 June 2021) released on 30 September 2021
  • It continued expansion in exploration, mainly in Patersons Range area of Western Australia.
  • The Covid-19 restrictions and standard Western Australian Government permitting delays kept the exploration activity under pressure.
  • Cash and cash equivalent stood around US$5 million post share placing during H1 FY21.
• Weak Fundamentals: WSBN did not generate any revenue in H1 FY21 and continued operating losses, and thus it is exposed to liquidity risk.
• Speculative Stock: WSBN is a penny stock with small market capitalization, and it is quite exposed to the market volatilities.
• Downtrend: WSBN’s stock price has plunged around 59% on a YTD basis, while the benchmark FTSE AIM All-Share index has shown an uptrend.
• Technical Indicator: From a technical standpoint, MACD line is trading below the centreline and has given a bearish price momentum.

One Year Share Price Chart

 (Data Source: REFINITIV, analysis done by Kalkine Group) 

Conclusion

Based on the continued losses, significant downtrend, rising market uncertainties, negative technical stance, we have given a “WATCH” recommendation on Wishbone Gold PLC at the current market price of GBX 7.10 (as on 11 November 2021, as on 9:00 AM GMT), while we look forward to reinvesting when short-term uncertainty fades away.  

*All forecasted figures and Industry Information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.