Is American Shale Oil About To Make 88 Energy Ltd Investors Oil Barons?

The fracking boom in America may be occurring across an ocean, but its still possible for investors in Birmingham or Yorkshire to take advantage of the shale oil revolution. 88 Energy (LSE: 88E) and Pantheon Resources (LSE: PANR) are two London-listed companies dreaming of becoming the next Marathon or Anadarko.

AIM-listed 88 Energy has dominated the headlines since January as shares exploded in value over 450% after the company’s first exploratory drills struck black gold. 88 may have begun life as an Australian oil driller, but after failing in the Outback it has shifted focus towards slightly colder Alaska.

While the company’s cold-sensitive workers may not have preferred this move, it has paid off for shareholders so far. Over the past years management has gone out on a limb and purchased roughly 200k acres of Alaskan tundra in the hope that the hydrocarbons underneath would be commercially exploitable. It was never in doubt that Alaska was oil rich, as oil majors have been snooping around the state for years, but only recently has 88 Energy sunk successful test wells in mainland Alaska.

However, while major oil reserves undoubtedly lie under 88 Energy’s acreage, the company is years away from being able to exploit these resources. The company has years of work ahead of it before its current exploratory wells produce significant quantities of crude. Furthermore, with limited cash on hand it will be forced to tap shareholders for further equity or turn to the debt markets to begin production.

And, even if production does begin, management is aiming for breakeven prices of $55/bbl for shale oil and $35/bbl for conventional oil, neither of which are particularly cheap for small producers. Due to its low capital reserves, uncertain prospects and years of work ahead of it, I would avoid shares of 88 Energy for the time being.


Shale oil wells also deplete quicker than conventional ones, requiring new wells to be built frequently. They also remain controversial with local landowners and are the frequent targets of populist politicians’ threats. With all these issues confronting them, I wouldn’t advise buying shares of 88 Energy any time soon for risk-averse investors.

If, like me, you’re still looking for growth companies but investing in two shale oil producers who have yet to actually pump any oil isn’t your cup of tea, I suggest checking out the Motley Fool’s latest report, A Top Growth Share.

This homegrown brand has increased sales every year since going public in 1997 and shares have already increased in value over 300% in the past five years. The Motley Fool’s crack analysts also believe that with international expansion just beginning, the company could triple again in the coming years.

To read your free, no obligation copy of this report simply follow this link.

Ian Pierce has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

CORRECTION: The initial version of this article stated that Pantheon Resources was also a shale player, whereas a fundamental tenet of the company's investment thesis is that it is precisely not involved in this field; rather, it is focused on the Eagle Ford conventional sandstone play, not shale. We apologise for any confusion this may have caused.