Borders and Southern Petroleum Plc

 
Borders & Southern Petroleum Plc (LON: BOR) is an oil & gas producers’ company, which is engaged in the business of exploration of oil and gas independently in the Falkland Islands in the South Atlantic. The group has three production licenses covering around 10,000 square kilometres.
 
Financial Highlights – H1 Financial Year 2019 (30^th June 2019, USD, thousand)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2019, the company remained in the development phase and didn’t generate any revenue. The group’s loss from operations stood at USD 820 thousand in the first half of the financial year 2019 versus a loss from operations of USD 783 thousand in the first half of the financial year 2018. The group’s LBT and LAT (loss before tax and loss after tax) stood at USD 820 thousand in the first half of the financial year 2019 versus an LBT and LAT of USD 961 thousand in the first half of the financial year 2018. The company’s basic and diluted loss per share stood at 0.2 cents in the first half of the financial year 2019 versus a basic and diluted loss per share of 0.2 cents in the first half of the financial year 2018. The group’s cash balances stood at USD 4,407 thousand as on 30^th June 2019 versus USD 6,784 thousand as on 30^th June 2018, representing 35.04 per cent decline. The group’s total assets stood at USD 296,600 thousand as on 30^th June 2019 versus USD 298,461 thousand as on 30^th June 2018

Share Price Performance

Daily Chart as of April8^th, 2020, after the market close (Source: Thomson Reuters)

Borders & Southern Petroleum Plc shares closed at GBX 0.915 at the time of writing after the market close on 8^th April 2020. Stock's 52 weeks High is GBX 2.98 and Low is GBX 0.55.

Risk Analysis
The group’s business is prone to several risk factors, including market risk (including foreign exchange risk and interest rate risk), credit risk and liquidity risk. The group doesn’t use derivatives to mitigate interest rate risk and believes in holding cash in fixed and floating lines.

Conclusion
Since the company is in the development phase, it doesn’t generate any revenues, and all the operations are financed through its cash reserves and grants. The profitability margins have remained in the negative zone but had significantly improved as compared to the last year data.The company rely heavily on the renewal of its licenses from the Department of Natural Resources, government and other regulatory authorities. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. With the outbreak of Covid-19, many countries-imposed restrictions on travel and resulted in a sharp fall in the stock markets globally.

Based on the above factors, we recommend investors to “Avoid” taking fresh positions at the closing price of GBX 0.915 (as on 8^th April 2020).
 

Global Petroleum Ltd

 
Global Petroleum Ltd (LON: GBP) is an oil & gas producers’ company, which is based out of Australia and is engaged in the business of upstream exploration in the Mediterranean and Africa. The group’s primary activities include exploration, production and development of oil and gas, with are two exploration blocks in Namibia region.

Recent News
On 7^th April 2020, Global Petroleum announced the signing of an agreement for licence of 3D seismic data for Namibia Block, 2011A (PEL0094) offshore with NAMCOR (National Petroleum Corporation of Namibia).

 Financial Highlights – H1 Financial Year 2020 (31^st December 2019, USD)

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, the company remained in the development phase and didn’t generate any revenue. The group’s loss from operating activities stood at USD 766,597 in the first half of the financial year 2020 versus a loss from operating activities of USD 938,220 in the first half of the financial year 2019. The group’s LBT and LAT (loss before tax and loss after tax) stood at USD 748,541 in the first half of the financial year 2020 versus an LBT and LAT of USD 916,390 in the first half of the financial year 2019. The company’s basic and diluted loss per share stood at 0.37 cents in the first half of the financial year 2020 versus a basic and diluted loss per share of 0.45 cents in the first half of the financial year 2019. The group’s cash balances stood at USD 1,762,074 as on 31^st December 2020 versus USD 2,786,791 as on 30^th June 2019. The group’s total assets stood at USD 4,474,203 as on 31^st December 2020 versus USD 5,270,584 as on 30^th June 2019.

Share Price Performance

Daily Chart as of April8^th, 2020, after the market close (Source: Thomson Reuters)

Global Petroleum Ltd shares were trading at GBX 0.95 at the time of writing after the market close on 8^th April 2020. Stock's 52 weeks High is GBX 2.70 and Low is GBX 0.6076.

Risk Analysis
The market conditions in which the company operates is full of challenges and might impact the operation performance and reduce financial performance as well. Any change in regulations and government policies could affect the overall business of the company.

Conclusion
Since the company is in the development phase, it doesn’t generate any revenues, and all the operations are financed through its cash reserves and grants. The profitability margins have remained in the negative zone but had significantly improved as compared to the last year data.The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. The company rely heavily on the renewal of its licenses from the government of Namibia and other regulatory authorities. The group is looking for drilling activities for Total operated Venus well in southern Namibia in 2020 and remained committed towards Italian applications.

Based on the above factors, we recommend investors to “Avoid” taking fresh positions at the closing price of GBX 0.95 (as on 8^th April 2020).

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