It’s been a tough time recently for investors in Genel (LSE: GENL), with the oil and gas play’s share price being hurt by a tumbling oil price and tensions in the Middle East. The company’s valuation has slumped by 84% in the last year alone and looking ahead, further falls could be on the horizon.
Major boost
Clearly, recent news regarding payment for oil exports by the Kurdish Regional Government (KRG) has been positive, with a handful of payments having been received in recent months. Furthermore, just this week the KRG announced plans to make regular payments, as well as gradually paying off its creditors over the medium term. As a result, Genel’s share price was given a major boost.
While this is encouraging, Genel continues to be owed £millions for past production and there is no guarantee that this will be received in the near future, due to the volatile nature of the political outlook in Northern Iraq/Kurdistan. Furthermore, Genel also recently reported that production in 2016 will fall significantly due to lower oil prices and, with the combination of geopolitical uncertainty, the prospect of a falling oil price and no guarantee regarding back payments, there appear to be better options elsewhere within the resources space.
Encouraging progress
Similarly, investing in Amur Minerals (LSE: AMUR) also lacks appeal based on the options available elsewhere within the mining sector. Although the company has a very bright long term future and its update from today highlights the progress which is being made, with a number of highly profitable mining stocks trading on low valuations, the risk/reward ratios elsewhere seem to be more enticing.
Of course, Amur Minerals has the potential to deliver strong share price gains over the medium term as it seeks to commence its drilling programme. Today’s update provides details on the equipment being delivered, the planned work programme for the site, and indicates that Amur making encouraging progress. However, it remains some distance off being a profitable business and given the uncertain outlook for the resources sector, more established sector peers could hold greater appeal.
Lacking appeal
Also releasing a positive update today is Imperial Innovations (LSE: IVO), with the investment company stating that it plans to raise £100m through a placing. The funds will be used to enhance its investment plans and to accelerate its growth rate and have been warmly welcomed by the company’s investors, with Imperial Innovations’ share price having risen by around 6% at the time of writing.
Despite this, the company continues to lack appeal. That’s at least partly because it is expected to record a fall in earnings of 65% in the current financial year and with it trading on a forward price to earnings (P/E) ratio of over 108, its valuation does not yet appear to reflect its expected decline in profitability.