Has the UKOG share price finally turned a corner?

Does UK Oil & Gas Investments plc (LON: UKOG) offer scope for a full-scale recovery?

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Having fallen from 9p in September 2017 to just 1p in May 2018, the performance of the UKOG (LSE: UKOG) share price has clearly been disappointing. Challenges regarding flow testing have hurt investor sentiment in the stock, while the cost of funding its operations has put its financial standing under a degree of pressure.

In the last month, though, the company’s stock price has risen from 1p to 2p. Although it is clearly a long way behind its previous highs, could this be the start of a recovery? And could it be worth buying alongside another resources sector stock that has also delivered disappointing share price performance in the recent past?

Improving outlook?

Recent weeks have seen an improvement in the financial standing of UKOG. It has raised around £12.5m in the last month (with £2m raised just a couple of days ago), and this is expected to be sufficient to fund its operational activity over the next 18 months. This may cause investor sentiment to improve to some degree, since any immediate risk of running out of cash seems to have been overcome. As such, investors may now be able to focus on the medium-term potential of the business.

In the near term, the results of flow testing operations could have a significant impact on its share price. They are focused on longer-term flow testing after the company has reported mixed results in the past. For example, in 2016 aggregate oil flow was 1,688 barrels of oil per day, but this was undertaken over relatively short time periods.

Clearly, UKOG is a relatively risky stock, given the nature of its business and its volatile share price. But with an improving financial position and the company targeting first stable oil production in 2019, it could offer turnaround potential.

Recovery potential?

Also seeing its share price fall in recent months has been gold miner Acacia (LSE: ACA). It is down by 54% in the last year, with the company reporting declining production in its second quarter production update that was released on Friday. Gold production was down by 36% to 133,778 ounces versus the second quarter of the previous year, with scaled-back operations being to blame as a result of the continued dispute with Tanzanian authorities regarding tax payments.

Despite this, the company’s future prospects may be brighter than the stock market is pricing-in. Production in the first half of the year was at the top end of estimates, and the company remains on track to meet guidance for the full year.

Acacia is expected to deliver 8% profit growth in the 2019 financial year. However, its shares trade on a price-to-earnings growth (PEG) ratio of just 0.7. This suggests that they may be undervalued at the present time. While risks are high, the recovery potential of the stock appears to be significant. As a result, it could be worth buying for the long term.

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.

Peter Stephens has no position in any of the 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.

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