MIDAS SHARE TIPS UPDATE: Oil firm Petroceltic has plenty in reserve
Oil: Petroceltic has given investors a bumpy ride
Oil and gas group Petroceltic has given investors a bumpy ride.
Recommended by Midas in March 2009 at 4p, the stock price equates to 6.16p today.
The real share price is 154p after investors were asked to swap 25 old shares for one new one last year.
Always a volatile investment, the price fell heavily on Friday as the firm revealed disappointing exploration results.
At this level, the stock is almost certainly undervalued.
Petroceltic produces 25,000 barrels of oil a day in Egypt and Bulgaria, delivering turnover of $197 million (£118 million) a year.
However, the jewel in its crown is a 38 per cent stake in a vast gas field in Algeria, Ain Tsila, which will start producing some time after 2017.
There are exploration assets, too but recent results have been poor, including last week’s news that wells in Iraqi Kurdistan, Egypt and Romania have failed to deliver.
Chief executive Brian O’Cathain is confident a second Kurdish well will yield promising results but some investors are running out of patience.
Mr O’Cathain announced a $100 million share placing two weeks ago, half funded by a new shareholder, Malaysian oil producer Dovenby Capital. This annoyed aggressive investor Worldview, which owns a sixth of Petroceltic and wants more.
It is asking investors to vote against the placing on June 9. Most followers hope this insurrection will prove unsuccessful but the sabre-rattling is unsettling.
Midas verdict: Petroceltic involves risk but the shares have potential. Ain Tsila is a great asset and the firm still has a wide range of exploration assets.
Existing shareholders should hold on to their shares. Daring new investors might pick up a few shares at current levels, in the hope that exploration proves more successful or the group is taken over.
Traded on: AIM
Ticker: PCI
Contact: http://www.petroceltic.ie/ or +353 1 421 8300
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