Which Will See Profit First, Falkland Oil and Gas Limited, Rockhopper Exploration Plc Or Xcite Energy Limited?

Will Falkland Oil and Gas Limited (LON: FOGL), Rockhopper Exploration Plc (LON: RKH) and Xcite Energy Limited (LON: XEL) produce profits before the cash runs out?

| 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.

Investing in smaller oil exploration companies is always going to be a race against time — they have to find the stuff and turn a profit before their investors’ cash runs out. The pressure is so much greater today, when oil prices are low and OPEC has forecast sub-$100 per barrel for the next decade, but that also means there can be bargains in depressed share prices.

Falkland Oil & Gas

According to its full-year results, Falkland Oil & Gas (LSE: FOGL) had $95.5m at the end of December and is fully funded for its 2015 drilling plan, which will build on the seismic data it has already acquired. The firm also announced its Zebedee oil and gas find in April, telling us that it, along with the firm’s Hector find, are better than expected.

With CEO Tim Bushell saying that the firm “looks forward to continuing to work with its partners to progress development of the substantial oil and gas resources” within the PL004b licence area in which it owns a 40% stake, profits really don’t look too far away.

Rockhopper

Rockhopper Exploration (LSE: RKH) shares the same PL004b licence and the Zebedee field, with a 24% stake, and so its future depends largely on the same resources as Falkland Oil & Gas — and the two firms also have stakes in other common areas around the Falklands basin, partnering with Premier Oil in some cases.

At the end of 2014, Rockhopper recorded $200m in cash, with chairman Pierre Jungels saying its “balance sheet remains strong and the Company is well placed to take advantage of potential growth opportunities which may present themselves as a result of the current market environment“. Does that mean it’s on the lookout for takeover targets? Whichever way it goes, Rockhopper’s future also looks healthy.

Xcite Energy

The focus for Xcite Energy (LSE: XEL) is significantly different, with the firm’s exploration centered on its Bentley field in the North Sea. North Sea operations can be expensive, though Xcite does have proven oil with its Bentley reserve estimates upped from 250 MMstb to 257 MMstb in February 2014. The company is in partnerships with a number of bigger firms to develop its resources, but it’s facing a tighter cash squeeze than its Falklands rivals.

At the end of 2014 Xcite had only £32.5m in cash, having secured new debt financing during the year, and it is in “ongoing funding discussions with potential co-venturer partners” according to CEO Rupert Cole.

Which is best?

Xcite is more out of favour with investors right now, with its shares down 56% over 12 months to 39p. Meanwhile, Rockhopper shares have slipped 35% over the same period, but the Zebedee success has halted the fall for now. And at Falkland Oil & Gas, the shares are flat at 27.5p, presumably reflecting the firm’s bigger stake in that newly found oil. The punters seem to be expecting good things sooner at Falkland, and I’m with them.

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

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

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

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

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

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »