PETER Strachan at Perth's StockAnalysis has provided a pithy, at some times entertaining, run-down on more than 120 listed junior oil and gas companies. When Strachan talks about this sector, people tend to listen.
His tabulated list includes share price, net cash, enterprise value, market cap and location of each company's operations -- a quick ready reference -- followed by some of Strachan's comments. But not all the companies are going to be happy -- in fact, most of them won't be. The "sell" recommendations come thick and fast.
Rawson Resources (RAW) is summed up thus: "Remarkably active but chronically under-funded explorer." Red Sky Energy (ROG) -- which has had its admirers -- is described by Strachan as "high-risk CSG explorer with little appeal".
And the people at Promesa (PRA) will wince when they read the company is a "complete waste of energy pot boiler for directors".
Over recent months, Pure Speculation has had considerable correspondence about Central Petroleum (CTP) from either admirers or concerned investors. We, of course, have been our usual indecisive and wishy-washy self, but not Strachan. "A share printing machine and shameless ASX arm-waver. Question over business model," he opines.
Westralian Gas & Power (WGP) is dismissed with "all this company does is raise money to pay wages". Boris Ganke's Longreach Oil (LGO) is a "hobby company with no money" while Kilgore Oil & Gas (KOG) is described as having "poor reporting quality of tiny gas 'discoveries'."
Strachan has never been impressed with the North American story -- so there's a "sell" on AusTex Oil (AOK), Elk Petroleum (ELK), Sunset Energy (SEY) and others.
But, to put on our serious face, reading this document is quite depressing. If Strachan is right, then a very large number of the oil and gas juniors should be avoided.
But he likes a few. Roc Oil (ROC) is one because of its strong cash generation. And not all the North American stories are dismissed: another to get an approving nod is Texon Petroleum (TXN), which closed at 58c on Friday. Strachan says it's a "spec buy" below $1, the company is cheap and its prospects and its shale wells demonstrate huge upside.
Magellan Petroleum Corp (MGN) is seen as the "cheapest stock on the ASX. Buy for long-term value ahead of new issue".
Horizon Oil (HZN), last sale 35.5c, is seen as a buy below 40c because of cashflow from the Maari field off New Zealand and its present drilling focus in Papua New Guinea. Others given a "spec buy" recommendation include Jupiter Energy (JPR), Entek Energy (ETE) and ADX Energy (ADX), the last mentioned because of its offshore gas play between Sicily and Tunisia.
Overall, though, Strachan's assessment must be disheartening for investors exposed to the oil and gas juniors. But there is hope. "Lifestyle board replaced with new blood. Direction and new assets awaited," he writes of Key Petroleum (KEY).
Now if only someone would do a similar exercise on the junior mineral explorers
KOG Price at posting:
0.2¢ Sentiment: None Disclosure: Not Held
