There’s been a lot of chatter recently around Pantheon Resources (LSE:PANR). The oil and gas exploration company has enjoyed a rocketing share price over the past year, up 324%. But given the volatile nature of the sector, is the PANR share price rise just hot air or a viable investment option for me?
Positive news boosting the share price
Over the past year, there have been several positive signs that have supported the PANR share price heading higher. Primarily, this focuses on the successful winter season at the Arctic projects, ranging from Talitha #A to Theta West #1. In the latest report, it spoke of the past winter being “one of tremendous achievement for Pantheon, with high-quality, light oil being confirmed in all targeted horizons”.
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In an April update on progress, further good news came out, with estimates of the oil potential upgraded. The summer season will offer more information and hopefully allow the business to proceed to the next stage.
Indeed, I think that most of the move higher in the PANR share price has been from speculative investors hoping for success in the projects. These have been rewarded following the winter results. This has allowed the share price to snowball in momentum, as more now pile in hoping for a smooth and profitable transition from exploration to production.
Breathing space on the financials
The discoveries from Pantheon are more promising than most oil exploration stocks that pop up on my radar. Another difference I note is the financials. The company managed to raise $96m at the end of last year in order to help finance drilling for the Theta West and Alkaid projects. This should enable the company to operate for many years ahead, despite the losses currently.
Usually, the oil exploration stocks I see have enough funds to last a couple of years. If they don’t strike gold in that period, it’s game over, both for them and their investors. Pantheon lost just under $6m in H2 2021. This contrasts to the loss of $4m in the same period in 2020. So even if the business struggles to commercialise and generate revenue over the next year or so, the financing gives plenty of breathing space. This is a positive point for the PANR share price.
Points to be aware of
However, I do have some concerns about the business that could halt the strong rally in the shares. For example, the weather in the Arctic is very unpredictable, and could prevent or stall progress this year.
Also, with a market capitalisation of £1.02bn, will I be buying the shares at an overpriced level? If I assume the market is efficient, then the price should accurately reflect the value of the business as we stand. So without any further increases in output, I could argue that there isn’t really much more upside to be had.
Personally, I think investors who’ve bought in over the past year have achieved some fantastic returns. But as an outsider looking in, I struggle to justify investing now, given the good news already factored in to the current share price. On that basis, I won’t be investing.