Are Gulf Keystone Petroleum Limited, Xcite Energy Limited And Amur Minerals Corporation The Small-Caps To Watch For 2016?

Will the tide turn for Gulf Keystone Petroleum Limited (LON: GKP), Xcite Energy Limited (LON: XEL) And Amur Minerals Corporation (LON: AMC)?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Smaller oil explorers and mineral delvers are being hit especially hard by tumbling prices for oil and metals, yet they’re still among the most talked-about shares by small-cap investors. Could 2016 be a year of recovery for them?

Shares in Gulf Keystone Petroleum (LSE: GKP) have continued to slide, losing 80% in the past 12 months to just 14p, despite the firm’s biggest hurdle looking as if it has been overcome. That’s been the problem of getting payment from the Kurdistan Regional Government for the oil it’s been handing over for international sales.

With a promised regular payment schedule taking months to turn into reality, the first gross payment of $15m finally happened in September 2015. Those payments have since continued, with the latest being announced on 6 January, taking the total so far to $60m.

The big problem is this income isn’t matching Gulf’s outgoings, and the cash available to it is dwindling. So Gulf is going to need a sharp rise in the price of oil, or some new fundraising, or perhaps even both if it’s to keep going.

North Sea

Xcite Energy (LSE: XEL) shares are also in a slump, with the price losing 64% since its peak last May, to 15p. Xcite is sitting on deposits estimated to be worth more than $2bn at its Bentley field in the North Sea, but the obvious big killer right now is the price of the stuff. Xcite has estimated a total lifecycle cost of round $35 a barrel, which is actually pretty efficient for North Sea oil that can be very expensive to extract – but with Brent Crude only fetching $34.50 as I write, that’s perhaps not looking so clever.

Xcite has enough cash for now, but it’s going to need some serious extra funding to turn its oily assets into commercial reality. And at the moment, investors aren’t exactly tripping over each other to fund such things.

Cheap nickel

Leaving oil alone, we come to Amur Minerals (LSE: AMC), a miner with substantial nickel, copper, and other metal assets in eastern Russia. The Amur share price spiked in June last year to 44.6p, but since then has plummeted 84% to just 7.2p today. There’s no profit yet, so what’s the story for investors?

Amur estimates its cost of nickel production as being very low, so the current slump in metals prices shouldn’t do the company too much harm in the long term and it should be in a position to prosper when a recovery finally happens. Cash doesn’t seem to be a problem right now with a £12.5m equity issue having been concluded only last month, which should seriously help the development of its Kun-Manie project.

But the big risk for me is political – Amur operates at the whim of the Russian government.

Can you stand the risk?

Any or all of these could come good, with Amur my favourite of the three, but it would need steelier nerves than mine to invest in the shares.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »