The Motley Fool

Are IGAS Energy plc shares seeing a ‘dead cat bounce’?

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.

Buying any stock which has experienced high volatility in its share price is a risky move. It can mean an investor sees significant paper losses in the short run, since investor sentiment can quickly change. In the case of IGAS Energy (LSE: IGAS), its share price had fallen by over two-thirds since the start of the year before jumping 20% on Monday.

Clearly, this could be little more than a ‘dead cat bounce’. This is where a share price temporarily rises after a large fall as investors look to cover their short positions. As such, over the medium term, the company’s valuation may continue its decline. However, could it also be the start of an improved performance which sees the business continue to recover towards its 2017 high.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Mixed performance

According to the company’s most recent results, it is making some progress with its strategy. The producer of hydrocarbons in onshore Britain has been able to complete its capital restructuring and fundraising. This was crucial for the business as it reduced net debt from £100m at the end of December 2016 to £7m at 30 June this year. This debt reduction should create a less risky business which is well-funded for its immediate operations, with a cash position of £16.3m and positive cash flow providing further evidence of this.

While revenue increased from £12.1m to £16.8m in the first half of the year, maintenance issues mean that production for the full year is expected to be 2,250 barrels of oil per day (bopd). Meanwhile, operating costs have risen by $1 per barrel to $28.50. At a time when oil prices remain at a relatively low ebb and many of its peers have been able to cut operating expenses significantly, this does not suggest the company is performing relatively well in that respect.

Outlook

In addition, the huge potential for shale activity in the UK is moving along at a relatively slow pace. Despite this, IGAS has stated that momentum in the industry is continuing to increase. For example, it is focused on developing its sites in Nottinghamshire. It is also seeking to advance activities at its site in Ellesmere Port, as well as across its acreage in the North West and East Midlands.

However, with there being a number of stocks in the oil and gas industry which offer greater size, scale and profitability at the present time, there may be better options available elsewhere for long-term investors.

Certainly, the company’s 20% surge on Monday could be the start of a period of sustained capital growth. However, equally it could prove to be a dead cat bounce. In the long run, with the price of oil and the prospects for the wider oil and gas industry being uncertain, it may be prudent to buy stocks with diverse asset bases, low operating costs and improving profitability. Such companies may offer the most compelling risk/reward opportunities for the long run.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Peter Stephens has no position in any shares 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.