A good penny stock to watch I believe is Victoria Oil and Gas.
I’d like to talk about fallen AIM star Victoria Oil and Gas (LSE: VOG), and its future as a potential mid cap Oil and Gas company. In 2006 this penny share peaked at around 260p and was flying, it is currently sitting now at just over 4pence a share (July 2011). Yes, this penny share went from 260p to a low of around 2.6p in a couple of years, but can it do the reverse?
So what does the future hold?
In May 2011 it was announced that VOG had been awarded a 25 year exploitation licence for the Logbaba gas field (located in Cameroon), with a potential extention for a further 10 years.
With a large stake in this field (95%, up from 57% due to a breakdown with RSM production) and with gas sales predicted to start Q4 2011 the future is quite bright indeed. So far there are 11 commercial customers signed up at a contracted price of $16 btu, the outlook is bullish with an expected rise in share price to come in-line with profits from the gas sales.
The real company maker however, I believe will be the West Medvezhye field, which is located in one of the most prolific oil & gas areas in the world. A recent RNS update shed some light on VOG’s future there, a few key points are:
An Estimated 400 million barrels of oil equivalent (mmboe) in-place in six features mapped by passive seismic and gas tomography surveys,
Reprocessing of 845 km of 2D seismic is complete and geophysical/geological modelling underway
Development studies in progress to commercialise the Well-103 discovery and prospective resources
Drilling is planned for Q4 2012
So it’s all great, right? Well, there are still a few doubts as to whether there is going to be a dilution or not in the near future to fund the completion of the pipe laying.
A recent FT.com article reads:
Victoria Oil & Gas, the Aim-quoted company with assets in west Africa, Russia and Kazakhstan, endured a turbulent week in Cameroon, as the name of its local subsidiary Rodeo Development might suggest.
Shares fell 4 per cent to a low of 4p on Wednesday after the company served an eviction notice to its private partner, RSM Production Corporation, who had failed to pay its share of $7m in agreed development costs for the Logbaba gas field in Douala.
However, shares recovered nearly 9 per cent by the end of the week after management insisted it had the funds to complete the onshore project, targeting proven and probable gas reserves equivalent to 35.3m barrels of oil, in time for projected first gas in Q4 this year. That will involve some re-routing of funds originally intended to develop its potentially larger Asia assets and there is speculation the company will tap the markets for more capex early next year. By then VOG hopes gas production will boost cash-flow. Expect more volatility ahead.
There are many bumps in the road for this penny share I am sure. Possible delays in laying down the pipe and meeting their estimated Q4 gas sales, potential dilution, global uncertainty, problems with the Eurozone, all key issues that come into play. I believe the foundations of this company are solid and with a good BOD headed by Kevin Foo I certainly believe that this is one to watch, especially for long term holders.
As with all penny stocks the investor has to proceed with caution, the above is just an account of my feelings for this share, as always you should do your own research.