Shares of 88 Energy (LSE: 88E) have whipsawed back and forth since the Australian oil producer sunk its first well in its new Alaskan acreage late last year. The positive results from this well suggested the company might be sitting on a massive new conventional and unconventional oil field. This news has led numerous investors to pile into shares, as evidenced by the oversubscribed A$25m share placement earlier this month.

Despite this dollop of good news, there are still numerous reasons I’m wary of investing at this time. One major concern is these share placements, which dilute current investors and will continue to be necessary for 88 Energy to fund exploration costs going forward. Another reason is that the company hasn’t even drilled its second exploratory well yet. This second well is targeted for Q1 2017 and will test whether the play is conducive to horizontal drilling; a key test as 88 sees the future of the field in this unconventional fracking. At the end of the day, 88 Energy is too far away from first oil, if it’s even to come, to make me comfortable buying shares at this point.

Debt problems

Kurdish oil producer Gulf Keystone Petroleum (LSE: GKP) produced roughly 30,000 barrels of oil per day in 2015, but it’s another oil and gas share I’ll be avoiding for the time being. The main cause for my hesitance is Gulf’s very poor balance sheet. The company has already postponed a $26.4m debt payment until the end of May, and has warned that it runs the risk of defaulting if it can’t meet this obligation.

This is a major worry because even if the company can meet this payment, it has another $26.4m due in October and a whopping $575m due in 2017. And after running an $85m operating loss last year on revenues of $86m, even slowly-rising crude prices may not be the company’s saving grace either. Balance sheet woes, the ever-present possibility of the Kurdish government once again withholding payment, and a need for major capital investment to maintain current fields are reason enough for me to avoid buying Gulf Keystone now.

Share dilution

Defence company Cobham (LSE: COB) is also no stranger to balance sheet problems as net debt rose to £1.3bn at the end of March. This level of debt brings Cobham within range of broaching the 3.5 times net debt-to-EBITDA ratio included in its debt covenants. In light of this, management is planning a £500m rights issue for later this quarter in order to pay down significant portions of this debt.

For current investors, share dilution isn’t the only problem facing Cobham. The profit warning included in the latest trading update was the second in six months as problems mount in its non-defence commercial divisions. Branching out from its core competency in defence to selling wireless communication services certainly appears foolhardy just as defence spending in the developed world begins to increase once again. A poor balance sheet, upcoming shareholder dilution and problems in the underlying business will keep me away from Cobham shares for the time being.

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Ian Pierce 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.