The Motley Fool

Why 88 Energy shares popped 25% last week

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.

Arrowings ascending on a chalkboard
Image source: Getty Images.

CORRECTION: An earlier version of this article incorrectly priced the shares in GBP rather than GBX.

As volatility picks up in the market, investors are increasingly looking to take advantage. Investors in 88 Energy (LSE:88E) shares certainly have seen a roller coaster ride of late.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Since hitting a high of 4.70p earlier this year, 88 Energy shares have since settled down to the 1p level in recent weeks. That said, shares surged to more than 1.40p per share after hours on Friday. Last week alone, the shares saw an increase of approximately 25%.

Why the optimism with this stock? Well, there are a few reasons investors are considering 88 Energy. Let’s dive into what investors are looking at right now with this energy exploration company.

88 Energy shares surging on new debt-free status

A key update 88 Energy shared on Monday of last week – surrounding the company’s intention to sell its Alaskan oil-and-gas tax credits in a bid to eliminate its debt altogether – has investors cheering 88 Energy shares.

Indeed, this move significantly improves the outlook for 88 Energy’s balance sheet. The US$18.7 million sale will allow the company to repay the remaining US$16.1 million of the company’s outstanding debt. Furthermore, 88 Energy will bolster its cash position as a result of the deal, providing more operational flexibility with the company’s existing drilling programmes.

From a free cash flow perspective, this deal is also bullish for investors. The company will reportedly reduce its annual finance-related overhead costs by roughly $1 million per year.

Financially speaking, this deal was a no-brainer for 88 Energy. It appears shareholders are the real beneficiaries of this strategic move. Indeed, investors betting on the long-term viability of this c.£165 million market cap energy player have reason to get excited.

Bottom line

88 Energy shares haven’t been without their share of headwinds of late. Power outages preventing sampling of two prospective zones with the company’s Alaskan Peregrine project have caused a significant selloff in recent months. And while operational updates have suggested these headwinds are likely overblown and short term in nature, investors have nonetheless gravitated toward other energy players of late.

Of course, the rally in 88 Energy shares has also coincided with an impressive improvement in global crude prices. Investors may be correct in pricing in commodity-related risks with such stocks right now.

That said, 88 Energy’s recently announced tax credit sale provides a near term one-time balance sheet boost that makes this stock hard to ignore. Accordingly, this is a company I’m certainly considering adding to my portfolio on weakness moving forward.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Chris MacDonald 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.