88 Energy are an Australian oil exploration company. The company hold drilling rights for operations in the North Slope of Alaska. 88 energy trade globally under three different ticker symbols, first being on the ASX “88e”, secondly on the LSE “88e” and is also available to US investors on OTC “EEENF”.
Recently the stock has seen a lot of volatility as the trading volume and speculation from insiders and retail investors alike has increased heavily in the past few months.
All 5 wells drilled thus far in the past 6 years have proved unsuccessful, until very recently when interest surged in the 88e operations. That’s because of a potential black gold mine called Merlin-1.
Merlin-1 has now completed its drilling phase for the season. The following wireline logging phase has successfully yielded two samples which are currently in lab tests. The tests hope to prove a discovery for 88e in what has been touted to be the most commercially oil rich zones in the whole of the US for decades.
Why has this stock been so volatile? Last weekend, investors awaited the recent announcement on 88 Energy’s activities. Investors were most interested in the wire logging updates regarding the Merlin-1 well. The announcement was released on Sunday on the company announcement page. website 88energy.com. Unfortunately, the report wasn’t exactly written for the less sophisticated investor and with some understandable misinterpretation of the facts, panic selling swiftly took effect.
That, coupled with the fact that many were in hope that samples would be taken from all zones of Merlin-1, they were not… Unfortunately, due to a power outage the wireline was recalled and part of the well collapsed in on itself slightly causing “sticky points.” This meant that the geologists were unable to retrieve the data they wanted from 88 Energy’s two most prospective zones.
This was a blow for the company, as the estimations for these two prospective zones were very high because the preliminary data “and shows” were astonishingly good. Having said that, after the dust settled following the nightmarish 70% selloff, it was noted that the report wasn’t actually bad, in retrospect it was pretty positive.
Before all of this happened, during the drilling phase, the drillers reported “smelling a petroliferous odor.” They also noted fluorescence sighted in the mud and subsequently opted into taking shares instead of cash for payment of the drilling.
Dave Wall, the current MD and one of the single largest shareholders of 88 Energy, decided to retire early, announcing he will be leaving his post in May 2021, this led speculators to conclude that 88e stood a good chance of discovering oil or even potentially being bought out.
Ultimately, the end goal for most oil exploration companies is to get a buyout from a larger producer. It has to be noted too that the North Slope is not only known to be abundant in oil but that it is a heavily protected area. With the Democrat majority now in place and subsequent green policies coming in, it is unlikely that any more drilling rights will be issued that readily. Therefore, there is huge scarcity at play with oil prices set to stay above $60 and that bodes well for an early buyout. The majors of note that already have a presence within ANWR are ConocoPhillips, BP British Petroleum and Exxon to name a few.
The outstanding share (OS) is notably high (1.6 billion OTC), however, with such a low market cap (~$400M) and the high potential of finding billions of barrels of high-quality commercial oil, investors are looking for large returns for the risk taken.
Some of the notable players are already within this space with some large shareholders based in the City of London and it’s been noted that most of the market liquidity in daily volume is coming from the UK.
Interest from institutional investors has been noted from Barclays and Citidel to name a couple. Next, investors await the heavily anticipated results from Merlin-1.
With any penny stock, there are inherent risks and this play is certainly not for the faint hearted.
The next report for the Macro Trend will be about the new acting MD and CFO Mr. Ashley Gilbert of 88 Energy. We will delve into the academic and corporate history of the man himself. Stay up to date on more 88 Energy news by subscribing for free today.
Disclaimer, the author of this article owns shares of 88 Energy.