The last few months have been hugely encouraging for investors in Empyrean Energy (LSE: EME). The oil and gas exploration company has released a series of positive news updates concerning the progress it is making in delivering its strategy. This has caused investor sentiment to improve sharply, which has contributed to a 1300% share price rise during the last year.
Looking ahead, it would not be surprising for this trend to continue. Interest in the oil and gas industry continues to increase, and this could help to push the company’s share price higher over the medium term.
Improving sentiment
With the oil price moving to its highest level since 2015, investor sentiment towards a range of oil and gas companies has improved in recent months. While in Empyrean Energy’s case its recent news has largely been responsible for its stunning share price gains, a rising oil price could mean that its valuation rises to an even higher level in future.
Certainly, there is likely to be higher volatility in the oil price. There is great uncertainty about whether OPEC will continue with its supply cut, as well as how non-OPEC producers will react to a rising oil price. However, leading producers such as Saudi Arabia and Russia seem to be keen on supporting the oil price in future. As well as this, increasing demand levels, which have reduced the supply surplus of recent years, are thus far showing little sign of slowing down. This could catalyse the oil price in future.
Furthermore, Empyrean seems to have a relatively sound financial position. It raised $1m in August of this year. With it having a net cash position, it appears to have the financial strength to deliver on its strategy. This could make investors more positive towards the stock, since a net cash position indicates that its risk profile may be lower than for a number of other oil and gas exploration companies.
Diversification
While a rising oil price may continue, it may also be prudent for investors to diversify into other assets. The gold price has also enjoyed a positive 2017, and gold miners such as Avesoro (LSE: ASO) have prospered this year. In fact, the company’s share price has gained 37% in the year-to-date, and quarterly results released on Monday showed it is making good progress with its strategy.
For example, gold production in the quarter to 30 September increased by 26% versus the prior quarter. This helped to boost revenue by 32% on the year, while adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) increased fivefold versus the second quarter level. This figure was boosted by an EBITDA margin of 21%, which was up predominantly due to reduced operating cash costs per ounce and an increase in the realised gold price.
Looking ahead, both Avesoro and Empyrean Energy could offer further share price growth. The two companies seem to have highly enticing risk/reward ratios at the present time.
