Emerging energy company, Eon NRG Ltd (ASX: E2E) has been building its oil and gas business in the US. The company intends to deliver on a strong development program in the coming years and lately, it has made robust progress in the development of its oil and gas exploration assets. Recently during the 2019 March quarter, the company commenced the permitting process for its first well (the Govt Kaehne #9-29) in the highly prolific Powder River Basin (PRB) region in which the company had acquired more than 15,000 acres of leases. Besides oil and gas division, the company also has a Battery mineral division from which the company intends to capitalize on the growing demand of battery minerals.
In 2018, the company’s Net revenue from sales increased by 21% as compared to the previous year which was very encouraging for the company.
Sales Summary (Source: Company Reports)
This oil and gas exploration company is exposed to various risks; however, it has been proactive in undertaking various actions and initiatives to cope up with the challenges it faces and thereby avoid any impact on its financial stability. Through its management systems, experienced staff, selection of experienced consultants and contractors, company risk management system and insurance policies, the company is trying to minimise risks and outcomes of factors affecting business operations and resulting financial performance.
One of the risks that the company faces comes from Petroleum reserves. The company rely on estimates of petroleum reserves for its operations; however, these estimates may change significantly when new information or techniques become available. In order to cope up with this risk, the company engages experienced external engineers from third party petroleum engineering consultants to review its petroleum reserves. These engineers are supervised by the senior personnel who have sufficient experience to qualify as a Reserves and Resources Evaluator as defined in the ASX Listing Rules.
Moreover, the company also maintains insurance coverage to limit its financial loss resulting from certain operating risks, in accordance with standard industry practice or as determined by the Board.
Big companies like EON are dependent on key personnel to oversee the day-to-day operation. If one or more of these personnel cease their employment or appointment with the Company or if the composition of the Company’s board of Directors changes, it could disrupt the company’s business and operations with resulting financial impacts. To cope up with risk, the company maintain competitive remuneration policies and incentive plans for its Directors and staff to maximise retention in order to avoid any potential disruption and financial impacts resulting from personnel movements.
Besides, in order to safeguard itself from any Environmental risk, the company conduct its activities to the highest standard of environmental obligation, including compliance with all environmental laws.
The company is also exposed to regulatory risk under which any new legislation or amendments could have an impact on the assets, operations and, ultimately, the financial performance of the company. In order to safeguard itself against this risk, the company maintains compliance with legislative, regulatory and contractual requirements through engagement of external legal, financial and technical advisors in relation to the operation of its business. The company’s management maintains awareness of the regulatory environment through general participation in the oil and gas sector, via sector related news flow from media, attendance at conferences.
With the above-mentioned actions and processes, Eon NRG stays fully dedicated to deal with the areas of uncertainty and business risks.
At the time of writing, i.e., on 21 May 2019, the stock of the company settled the day’s trading at a price of A$0.006, with the market capitalisation of ~A$4.62 Mn.
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