With Brent crude falling to below $50 a barrel, the market has been tough on oil explorers and on commodity stocks in general. Does that mean we should run away from such investments, or is it an opportunity to buy while they’re cheap?
News of an 8% fall in production from its Trinidad operations didn’t do Range Resources (LSE: RRL) much good, and the shares are down 8.5% to 0.6p as I write. Over the last 12 months we’re looking at a 62% fall, although for some of that period the shares were suspended for technical reasons.
Fall in production
The firm said it is disappointed by the production drop, from 620 barrels per day to 570 in the past two months, but reckons it’s still cashflow positive. And with four new development wells lined up for drilling in the third quarter, Range “believes that the next six months will show substantial improvements in operational performance“.
Analysts were forecasting a very tiny profit for 2016, though the further deterioration in the oil price casts surely doubt on that for now — but on the other hand, there’s little point in trying to work out a 2016 valuation based on today’s oil price. And with its recent funding package in place, Range looks safe enough for now, though certainly not an investment without risk.
A safer bet?
An oily I have liked the look of for a while is Falkland Oil & Gas (LSE: FOGL), which is sitting on some very nice sounding discoveries around the Falkland Islands — the firm’s find at Isobel Deep in the North Falkland Basin, which it shares with Premier Oil and Rockhopper, beat all expectations and could indicate up to 1 billion barrels of recoverable oil in the whole region.
The share price brightened up in the first couple of months of the year, but since March it’s slipped back from around 37p to 24p today as the uptick in the price of oil has reversed itself — it was fetching more than $60 back then. But the firm has plenty of cash to fund its 2015 drilling programme, and its assets make it look attractive.
A five-bagger
Amur Minerals (LSE: AMC) is one of those rare miners whose share prices have risen this year. In fact, at 16.3p it’s up more then fivefold in 12 months — but its success was all contingent on gaining a licence for its Kun-Manie prospect in Russia. It got that in June, and the price spiked much higher and even reached 44p before settling down to today’s levels, so there’s plenty of volatility.
The finance for developing the project is not settled yet, and the mere fact that it is in Russia adds risk. But the company’s “operational blueprint” published in late June sounded provisionally optimistic, and there could be nice gains for those willing to take on a potentially exciting ride.