This stock has turned £1,000 into £7,000 in just 9 months

This small-cap has produced huge returns but is it a good home for your investment cash?

| 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.

Since the beginning of 2017, shares in small-cap oil & gas producer Empyrean Energy (LSE: EME) have gained over 600%, turning a £1,000, 40,000 share investment into just under £7,000 today. This explosive growth has catapulted Empyrean from a market capitalisation of around £8m to £53m and there could be further gains to come. 

Ready for take-off

Empyrean’s shares first took off during June when the company announced solid progress developing a trio of assets spread over China, Indonesia and the US. Since then, the good news has continued. In Indonesia, testing at the Mako South-1 well  produced high-quality gas flows of 10.9m cubic feet of gas per day, a performance management described as “exceptional.” A few weeks later, the company reported that its partner in the US, Sacgasco Ltd had discovered “significant gas shows” at the Dempsey 1-15 well in the Sacramento Basin onshore California. While testing was being carried out at these two assets, Empyrean has been busy in China compiling seismic data with its own testing and through acquisitions. 

Today the company announced yet more good news from its California asset. The well, which has already produced positive results, is still being drilled and has reached a depth of 2,760 metres. Drilling will continue into the under-explored deeper targeted reservoirs in the 440 metres of the remaining section to be drilled. Initial indications are promising and management has high expectations.

In today’s release, CEO Tom Kelly declared: “After slow and steady drilling through some very hard rocks over the last few days, we are very encouraged to see the best looking gas shows from another sand in what we now believe to be part of the primary target zone in this well. We have not drilled out of this latest gas bearing sand yet, so it will be interesting to see how thick this zone is.

Time to buy? 

So it looks as if this well could be better than expected, which is good news for investors and could ignite further share price gains. As well as these positive results from California, Empyrean has today released the findings from its surveys in China. Initial findings “greatly” exceed the firm’s early expectations. The three prospects considered by the company contain an estimated 591m barrels of oil in total, according to the preliminary survey. Further data processing is required to give a more reliable estimate. 

Considering all of the above, it’s clear Empyrean has a highly valuable portfolio, but could the company be a good investment? Well, as of yet it is not producing any income, and the company is burning through cash. 

At the beginning of August, the company raised £1m by the placing of 12m shares at 8p to finance development operations, following two fundraisings during June for £1.5m and a £1.2m cash raise at the beginning of May. Considering the recent rise in the firm’s share price, I would not rule out an additional capital raise in the near term to raise cash while the going is good. 

These fundraisings show Empyrean needs more cash to keep the lights on, and while the company’s asset portfolio looks attractive, I’d treat the shares with caution until it starts producing revenue. 

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.

Rupert Hargreaves has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

After crashing 50%, is now the perfect time to buy this world-class FTSE 250 share?

The worst-performing share on the FTSE 250 over the last year is also the most exciting one of all. How…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: July’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

Is this one of the FTSE 100’s best-value growth shares?

Looking for great-value recovery shares to buy today? Based on City forecasts, this could be one of the best that…

Read more »

Investing Articles

Will the Tesco share price hit a 10-year high in 2024?

Up from 200p less than two years ago, the Tesco share price has enjoyed impressive growth lately. Now I'm considering…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Nearing its 12-year low, this FTSE growth stock could be the bargain of the year!

Harvey Jones has happy memories of owning this FTSE 100 growth stock. Now he's wondering whether to take a trip…

Read more »

Investing Articles

BT share price: a bargain or one to avoid?

This Fool has been keeping tabs on the BT share price. Despite looking cheap, he's steering clear of the stock…

Read more »

Electric cars charging in station
Investing Articles

Where will Tesla stock be in 5 years? Here’s what the experts say

The analysts' outlook for Tesla stock in the next few years seems to be all over the place, as the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

3 reasons why I predict UK shares will soar over the next 12 months!

Our writer believes there are plenty of reasons why UK shares will do well over the next year or so.…

Read more »