Here’s what I’d do about UKOG shares today

UKOG shares have jumped over the past week on progress in Turkey, but the company’s long-term future is far from guaranteed.

| 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.

UKOG (LSE: UKOG) shares have charged higher over the past week. The stock has increased in value by 137% over the past five days. Over the past month, shares in the oil and gas business are up 220%.

However, over the past 12 months, the stock’s performance is less impressive. Since the beginning of April last year, shares in UK Oil & Gas have only gained 21%. 

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

It’s essential to take into account the stock’s historical performance when analysing its recent gains. Indeed, when viewed from a long-term perspective, this week’s performance isn’t that impressive.

Following recent gains, the stock is currently changing hands at 0.42p. That’s a decline of 95% from the stock’s five-year high of 8.4p. And if we go back to 2005, the all-time high for UKOG shares stands at 124p. Shareholders who’ve owned the stock since have lost 99.7% of their capital.

The downward trend of UKOG shares

I think these numbers say a lot about the company and its long-term prospects. Oil and gas exploration is an incredibly risky business. It’s also astonishingly expensive. One of the reasons why UKOG shares have performed so badly over the past decade and a half is that the firm has been issuing new shares to investors to raise cash.

For example since 2014, the number of shares in issue has increased from 842m to 12.5bn. With each new share issued, existing shareholders’ claim on the business is reduced. Therefore, each share becomes worth less. And the more shares the company has outstanding, the more it’ll have to issue in future to raise cash.

UKOG shares have been caught in this spiral for years. The company’s most recent fundraising was in October of last year. The firm issued 1.4bn new shares worth £2.2m to fund its share of initial drilling and seismic costs at the Resan Licence in Turkey. 

It would appear the recent jump in the company’s shares can be linked back to the prospects of what could lie ahead at this Turkish prospect.

Complex outlook 

While this prospect could be a game-changer for UKOG shares, success is far from guaranteed. What’s more, I have to wonder how the company will fund the rest of its share of development costs? I think it’s likely more shares will be issued. This could depress the share price further. 

Therefore, while there’s a chance UKOG could be on the verge of discovering a vast new oil reserve, I wouldn’t buy the company today. I’m concerned that even if the business does strike oil, it’ll have to tap shareholders for millions more in funding to progress with developing the prospect. 

That said, the business could prove me wrong. Oil and gas exploration is one of those businesses that can make fortunes overnight. UKOG is still trying to develop the controversial Horse Hill oil project near Gatwick airport, which could have tremendous potential.

When coupled with the company’s overseas prospects, the group has the foundations of an international oil enterprise. However, turning these prospects into cold, hard cash and profit is proving harder than expected.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Rupert Hargreaves 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.

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Lloyds shares are down 10% in 2022. What next?

Lloyds shares have dropped by almost a tenth so far in 2022. But the bank is in good shape to…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How to aim to use the Warren Buffett method to make a million, starting today

Why do investors love Warren Buffett so much? His 3.6 million percent investment return since 1965 probably has a lot…

Read more »

Various denominations of notes in a pile
Investing Articles

3 big income stocks hiding in plain sight

There are plenty of high-paying income stocks flying under the radar right now. Paul Summers offers three examples he likes.

Read more »

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

2 FTSE 100 shares I’m buying in July

Andrew Woods wonders whether these two FTSE 100 shares could bring growth to his portfolio and if he should add…

Read more »

positive mental health woman
Investing Articles

2 dirt-cheap stocks investors should buy to hold until 2030!

Recent market volatility means lots of UK shares now offer brilliant value. Here are two ultra-cheap stocks on my radar…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

My top 7 dividend shares to buy as inflation soars

Dividend shares can be an excellent way to earn some passive income. Our writer considers seven top picks to help…

Read more »

Woman looking at a jar of pennies
Investing Articles

I think the JD Sports share price is a bargain. Here’s why

Our writer explains why the JD Sports share price has led him to buy more for his portfolio.

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is this tech stock one of the best shares to buy now?

Jabran Khan is on the hunt for the best shares to buy now for his holdings and takes a closer…

Read more »