A big winner so far this year has been Predator Oil & Gas (PRD). Management has sensibly (from their point of view) continually delayed testing, ensuring the ability to keep fundraising for each well. It has also offered a profitable trade each time. The initial MOU-1 well in Morocco was drilled in 2021 and provided exceptional gains, moving up from a low of 1.21p post placing to a high of 22.5p prior to the spud. Three further wells have been drilled this year: MOU-2 (funded by a 5.5p placing in 2022; the share price reached a high of 12.3p prior to the spud), MOU-3 (funded again by a 5.5p placing; the share price reached a high of 9.89p prior to the spud) and MOU-4 (funded by an effective 10.5p placing; the share price reached a high of 21.3p subsequently - back at 15.5p another placing now appears imminent). All were covered in the Private Blog, which I’ll refer to as the Private Letter henceforth, to match in with the Substack title of Oilman Jim’s Letter.
Forget long term investment potential with companies like PRD. The project might come off, but the vast majority don’t and overall you’ll lose more than you gain by holding on to these types of companies post drill. The easiest money with these is made from the short term trading while events are taking place. Gear it up a little through a broker like IG and gains of several hundred per cent are there to be had each time. Read the Core Information section on the website to understand all this and more.
Another good one this year with similar dynamics to PRD was Petro Matad (MATD) and its Velociraptor-1 well. The company’s shares moved up from a placing price of 2.5p to 7.1p prior to the spud. Like most, its well didn’t come in, but that did not matter to those who traded it for what it was. These drilling events happen regularly and they are all covered in the Private Letter. There are more in progress now.
These are in my view the most viable way of playing the market and making money. For those wanting to invest in oil and gas development and production, and receive income from it, consider investing direct in wells (via fractional interests) and cut out the small public company in between, which is taking several million pounds a year out of the pot in salaries and administrative expenses and will rarely return any cash to shareholders. It’s satisfying to participate directly and you’ll actually be part of the oil industry owning a direct interest in a well or wells, receiving monthly operating and production reports - and even more importantly revenue cheques. If that’s too daunting, invest in the larger companies with fully professional managements and a strong history of dividend payments.
If you’re a longer term investor, a good measure of management effectiveness is the comparison of the total amount invested into the company with the market capitalisation. For example, a total of £183 million has been invested direct into Serica Energy (SQZ) and its market capitalisation is £858 million. In contrast, over $30 million has been invested into Nostra Terra Oil & Gas (NTOG) and shareholders have been rewarded with a market capitalisation of just over £1 million. Pantheon Resources (PANR)’s management has consumed over $300 million of investors’ money and delivered a market capitalisation of less than £100 million. Something to think about if you're buying shares in a company other than for a trade.
The Private Letter has been published each week since November 2019. The Sunday Blog has been going even longer since February 2018, first on Blogspot and then on Substack. Henceforth I’ll refer to the Sunday Blog as Oilman Jim’s Letter, again to be consistent with its Substack title. Oilman Jim’s Letter is free. The Private Letter is paid for and shares my actual trading ideas: the document I send out is exactly what I use to guide my own trading, with all the company and well information actually necessary. Why I trade these particular situations exclusively is explained fully in the Core Information section on the Substack website.
It’s important to understand that all that matters in the stock market is whether you’re right or wrong about the direction of the share price (the fundamentals are interesting, but even if your analysis of the operational side is correct it does not necessarily ensure a profit as the Core Information section explains). Check back through the letters/blogs and I believe you’ll find that I’ve invariably got it right.
Go for fully funded companies with no convertible bonds or similar outstanding, which have a strong future news flow leading up to a potentially transformational event. Maintain the discipline not to trade different situations and risk losing money. And remember, you do not have to be in everything; other than spreading risk it makes no difference if your funds are in similar shares. Just go for the best ones with large audiences, there is no reason to be in more. You can subscribe to the Private Letter below. The price is just a small fraction of one good trade.
Oilman Jim’s Letter will be back in September. The Private Letter continues as regular throughout August, which often tends to be a very profitable month. A particularly exciting new drill with exceptional potential has been added this weekend.