What happened? And is this a potential opportunity to buy the shares at half price for my portfolio?

The Pantheon Resources (PANR) share price crash

Pantheon is a US oil exploration business. After receiving approval from the Alaska Department of Natural Resources, the firm began developing its Talitha #A project. It is expected to contain a volume of up to 1 billion barrels. Needless to say, that’s quite an opportunity.

Over the next few months, encouraging early indicators continued to be received. In fact, the management team was so confident in the project that Pantheon acquired 100% of the share capital to be the sole beneficiary.

Last week, after some delay due to poor weather conditions, the firm successfully completed its reservoir test for Kuparuk — the deepest and most promising point in the well. But despite early indicators, the results were quite disappointing. While Pantheon did find high-quality light oil, the flow rate was far too low due to unexpected levels of pressure, making extraction potentially unviable.

Given the high level of shareholder expectations surrounding these results, the collapsing PANR share price is not that surprising to me.

Is it all bad news?

This discovery is undoubtedly disappointing for both Pantheon and its investors. However, there are some reasons to be optimistic.

While Kuparuk was the company’s core focus, there are another four independent reservoirs that have yet to be extensively explored. The firm actually performed some initial tests on the shallower zones and discovered light oil at a much higher quality than expected. A more detailed investigation is set to commence at the start of next winter. And in the meantime, Pantheon has begun analysing the geological data acquired in the most recent testing.

It seems to me that the problems encountered, while frustrating, are ultimately a speed bump rather than a concrete wall. And so the Talitha #A project could still be the opportunity investors thought it was. Assuming that it is, then the PANR share price could very well recover over the long term.

The bottom line

Oil exploration companies are inherently risky. Complications and disappointing results can be pretty common and lead to significant share price volatility, as seen with Pantheon. However, I do believe the recent sell-off might be a bit of an overreaction by shareholders. Talitha #A could still very much be a viable project. And the potential extraction of 1 billion barrels worth of oil could push the PANR share price higher.

Having said that, there remain a lot of unknowns at this time. Therefore I’m keeping Pantheon on my watchlist for now. When there is more information available, I’ll certainly be taking another look.

The post Why did the Pantheon Resources (PANR) share price crash? appeared first on The Motley Fool UK.

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Zaven Boyrazian does not own shares in Pantheon Resources. 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.

So what’s causing these massive price swings? And is this a business I should add to my growth portfolio?

The volatile 88 Energy (88E) share price

Last month, the oil exploration business published an operations update to inform investors that drilling had begun at its Merlin-1 site. Given that this location is expected to contain 645 million barrel’s worth of oil, it was particularly exciting news. And so the 88E share price began climbing.

The purpose of this drilling was to install a Blow-Out Preventer system so that material tests and later extraction can be done safely. Throughout March, the company performed all the necessary equipment and wireline tests to get more information about the oil reservoir.

Unfortunately, this is where things started to go wrong. After reaching the ideal depth, there was a power outage linked to equipment failure. This forced the company to pull out of the hole to make repairs. But upon re-entry, further complications arose, and it was no longer possible to perform the necessary tests or extract any samples.

Following this failure, 88 Energy decided to move to the next best prospective zone. But once again, the tests failed to be completed after the equipment became stuck. Eventually, this second site was deemed too risky to try again.

Ultimately this means that the company could not sample its most promising drilling sites to verify an oil discovery. And so, naturally, the 88E share price crashed just as fast as it went up.

What’s next for the business?

Such complications are not uncommon in this sector. Running such an oil exploration business is a complex and tricky challenge that carries a lot of risks, especially since it’s also at the mercy of fluctuating oil prices.

But despite these frustrating events, there are some reasons to be optimistic. While the company did not achieve the goals it had set out to, it did acquire some samples from some of its less prospective zones in the area. Based on initial interpretations of the gathered data, they show the potential for an extensive, previously unknown, oil reservoir. Further investigation and sample analysis are now underway.

Meanwhile, its second-leading project, Harrier-1, continues to show promising petrophysical characteristics in line with expectations. Drilling at this site will begin in 2022.

The bottom line

The failed tests are undoubtedly bad news. But as frustrating as it may be, these are ultimately short-term disruptions. The company has already begun preparing for the next stage in its exploration. And while it is lacking a significant source of revenue, it does have around $13m cash on the balance sheet to cover expenses for the foreseeable future.

Combined, the Merlin and Harrier sites are expected to contain 1.6bn barrels worth of oil. If the company can confirm this discovery in its next testing attempt, I believe the 88E share price can start surging again.

Having said that, I think it’s too soon to invest as there are currently a lot of unknowns. So 88 Energy is on my watch list for now.

The post Can the 88 Energy (88E) share price explode again? appeared first on The Motley Fool UK.

More reading

• More oil wobbles as the BP share price dives 7% in a day!
• Meet the 9.6%-yielding income share that could keep growing its payout!
• When will Barclays shares hit £10?
• easyJet shares have bounced back before. On a P/E ratio of 6, could they do it again?
• Could National Grid shares offer me a dividend that won’t be hurt by inflation?

Zaven Boyrazian does not own shares in 88 Energy. 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.