Another week, another price fall, and yet more oil & gas companies are slumping to 52-week lows:
Afren (LSE: AFR) shareholders have been through the mill, and when the company told us it had managed to claw back $17.1m from former CEO Osman Shahenshah and former COO Shahid Ullah, who had been sacked for taking unauthorised payments, sunnier days ahead might have been expected.
But the crumbling price of oil has killed off such hopes, as Brent Crude is now just a smidgen above $46 a barrel — this week it hit its lowest price for six years. A disappointing update on Afren’s reserves on 12 January didn’t help, and the share price lurched further down as a result. Afren has now crashed by 85% over the past 12 months, to a new 52-week low of 22.75p.
Hardy Oil & Gas (LSE: HDY) has fared a little better, with a smaller fall of just 28% in 12 months. It’s been helped by a nice spike in June 2014 when full-year results were very upbeat about a likely trebling in natural gas demand in India and put a positive political slant on the country’s energy policy.
But the oil slump hadn’t started then and the black stuff was still selling for over $100 a barrel. Since the crash, Hardy shares have fallen to a 52-week low, of 55.2p, on Tuesday. And that’s seriously worrying for an oil explorer with no expectations of profit this year or next.
Enquest (LSE: ENQ) scraped a new low on Wednesday, having lost 81% over the past year to just 21.5p, with the oil crash only being part of the reason — albeit a large part.
Prior to the downturn, Enquest was already facing delays in its North Sea exploration, where its approach of investing to extend the life of older oil fields will be under price pressure. North Sea exploration is relatively expensive at the best of times, and there won’t be many who can make a profit at sub-$50 prices.
As things stand, we’re looking at plummeting EPS expectations for 2014 and 2015, and a big rebound predicted for 2016 is of little comfort right now.
Will they survive?
Our big oil companies can easily sit out the storm, but if prices remain this low over the longer term there are a good few smaller explorers at serious risk of going under.