Oil and gas explorer Empyrean Energy (LSE: EME) and clinical-stage biopharmaceutical company Motif Bio (LSE: MTFB) are two of the most exciting small-caps on the UK market today. They are also among the most volatile, with their share prices spiking in recent months, only to slip in recent days. Companies like these could make you seriously rich, but you must also understand the risks.
Cooking with gas
Empyrean is pursuing what it describes as “three cornerstone assets with transformational potential,” the Block 29/11 offshore field in China, Duyung PSC offshore Indonesia, and a multi-project participating interest in the Sacramento Basin, California.
At the start of November it had the distinction of being a 12-bagger over 12 months, fuelled by positive seismic data at its China prospect, better-than-expected reservoir quality in Indonesia, and several zones of high gas flows in Dempsey, Sacramento. However, it has slipped due to profit-taking and a disappointing release on 15 November showing that the lowest zone in Sacramento is “sub-commercial” at current gas prices. However, significant gas flows suggests shallower zones could offer more encouraging results.
Empyrean strikes back
Oil investors must be constantly braced for potential setbacks like this one. Dempsey still offers a potential 1trn cubic feet, which local surface infrastructure could quickly bring to market. Recent slippage might even be your opportunity to buy into this £60m AIM-listed explorer.
Oil prices are rising, Empyrean has an experienced industry team behind it, and also boasts a net cash position. It is definitely one to monitor to see whether the share price fails lower as short-term investors drift away. There could be a cheaper buying opportunity ahead, if you are feeling brave, but there are also other exciting prospects out there.
Motif Bio went off like a bullet following publication of its half-yearly report on 29 September, its share price leaping 50% in a week to peak at 45p by 6 October. This was down to positive top-line results from REVIVE-1, a global Phase 3 clinical trial of its investigational drug candidate iclaprim in patients with acute bacterial skin and skin structure infections. However, the AIM-listed stock has also since trailed away and today languishes at around 31p.
This £82m company is a clinical-stage biopharmaceutical specialist that develops novel antibiotics to treat patients with serious infections caused by multi-drug resistant bacteria. You can see the opportunities, and of course, the threats. As with Empyrean, future revenues, profits and stock market performance will be driven by news flow, so brace yourselves.
Recent news, such as announcing positive topline results for its REVIVE-2 treatment, presenting new pre-clinical data on iclaprim and securing up to US$20m in debt financing in mid-November have not prevented the downwards drift. However, this is a small company aiming at a big juicy target, and if its treatments come through the pipeline, you can expect its share price to spiral. Or you might prefer this pharmaceutical opportunity.
Both these companies are trading at roughly half their 52-week highs to make them an exciting opportunity for those happy to embrace volatility rather than run away from it.
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Harvey Jones 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.