The 88 Energy share price collapses again! Should I buy this UK share today?

The 88 Energy share price is sinking again! Does this UK oil share’s fresh descent provide an excellent dip buying opportunity?

| 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.

A string of operations updates across its Alaskan operations has caused the 88 Energy (LSE: 88E) share price to shake wildly in recent weeks.

Exciting acquisition news, combined with positive testing at its Merlin-1 well, helped lift the share price to multi-year highs in late March. But the UK oil share collapsed shortly after because of testing difficulties at its much-hyped assets. Indeed, the company has slumped again in value on Tuesday following the release of its quarterly update.

At 1.18p the 88 Energy share price is now 8% lower on the day and trading at two-week lows.

Merlin re-entry 

That said, there isn’t anything obviously chilling in 88 Energy’s latest statement. In fact the UK share confirmed in today’s update that “the [Merlin-1] well may be re-entered in the future, if warranted, in order to drill a side track and conduct a flow test”.

Drilling results at Merlin-1 in March were described by 88 Energy chief executive Dave Wall as “encouraging”. The company said that “the gamma log indicates the presence of more sand packages than those in the Analogue Wells,” and that the sand packages in Merlin-1 “are generally cleaner in nature” too.

Work also revealed that “oil shows were recorded over multiple intervals in the Nanushuk while drilling Merlin-1,” 88 Energy said last month. News that “one of the prospective horizons in Merlin-1 did have substantially elevated total gas” amplified investor buzz.

A subsequent wireline logging programme in early April failed to give market makers the news they wanted, however. Work confirmed “multiple prospective zones” in line with previous studies and “good mobility” across these zones. However, a power outage later in the programme forced testers to down tools. A return to the zone was deemed too high risk at the time. And so 88 Energy announced plans to plug the well, claiming then that “it is now too late in the season to initiate flow testing operations”.

The 88 Energy share price falls again!

So there was no news on Merlin-1 to cause the 88 Energy share price to sink again today, then. There were no further details on testing at its Project Icewine asset in Alaska, either. Nor was there news on permitting and planning at its Yukon leases or its acquisition of the Umiat oil field.

88 Energy’s latest share price fall illustrate one of the perils of buying penny stocks. UK shares that cost less than £1 can be prone to sudden and extreme volatility. Investors can build a big block of shares at little cost when shopping for penny stocks. So when they sell it can have significant ramifications for the share price. It therefore doesn’t take a nugget of bad news to send a share plummeting, as 88 Energy’s performance today shows.

This — allied with the high-risk nature of oil exploration — means that 88 Energy isn’t a UK share I’ll buy.

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.

Royston Wild 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.

More on Investing Articles

Investing Articles

Here’s why Aston Martin’s one of the best-performing UK stocks today!

Several UK stocks pushed upwards on 24 July, and this iconic, British car manufacturer was among the best performers. Why…

Read more »

Investing Articles

Down 85%, but I’m backing this FTSE 250 stock to fly like the Rolls-Royce share price

The Rolls-Royce share price has flown to the stars and Harvey Jones thinks it's too late to buy. So he's…

Read more »

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

Is now the right time for me to buy revived FTSE national institution Marks and Spencer?

Marks and Spencer was once a revered FTSE 100 firm, but poor decisions led to its demotion in 2019. Now…

Read more »

Market Movers

Up 11% today, can this FTSE 250 stock finally get motoring?

Jon Smith explains why the Aston Martin share price has jumped this morning, but urges caution after he picks apart…

Read more »

Investing Articles

With £456m of net cash, FTSE 100 stock easyJet’s ready for take-off

Our writer's been positive on this FTSE 100 for some time, but these Q3 results and its growing cash pile…

Read more »

A senior woman sits up on the exam table at a doctors appointment. She is dressed casually in a blue sweater and has a smile on her face as she glances at the doctor. Her female doctor is wearing a white lab coat and seated in front of her as she takes notes on a tablet.
Investing Articles

Primary Health Properties: a FTSE 250 REIT with a 6% yield, a growing dividend, and a positive outlook

After its latest results show rental income growth, Stephen Wright's looking to buy a FTSE 250 REIT set to benefit…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

How much passive income could I make for every £1,000 invested in Aviva shares?

Even a relatively small investment in Aviva shares could generate much greater passive income, particularly if the dividends are reinvested…

Read more »

Close-up of British bank notes
Investing Articles

I’m considering 100 shares in this FTSE 250 gem to aim for £300 a month in dividends

Mark Hartley outlines why a lesser-known banking stock from the FTSE 250's worth considering for an income portfolio in 2024.

Read more »