How is the needle moving on two energy stocks: TomCo Energy & ADM Energy?

Summary

  • As the per Jonathan Haskel, member of the Monetary Policy Committee, there is a risk of a surge in unemployment in the UK as the COVID-19 crisis hard hits the economy.
  • The BOE suggests that the banks should be fully equipped by the end of 2021 to manage the climate risk on the business.
  • The Brent crude oil was trading at USD 42.02 per barrel, up by 1.79 percent (as on 1st July 2020, before the market close at 4:40 PM GMT+1) and WTI crude oil was nudging at USD 39.86 per barrel, up by 1.50 percent.

Given the above developments in the market, we will discuss two FTSE AIM All-Share listed energy stocks - TomCo Energy PLC (LON: TOM) and ADM Energy PLC (LON: ADME). As on 1st July 2020 (before the market close at 3:55 PM GMT+1), TOM shares were down by ~7.90 percent, and ADME shares were up by ~5.50 percent, respectively. Let's analyze the financial and operational performance of two stocks.

TomCo Energy PLC (LON: TOM): Greenfield Energy formed in JV with Valkar

TomCo Energy PLC is a UK-based company, which is engaged in the development of shale oil assets. The Company has exploration and development license for nine shale oil leases in Utah, US, covering about 15,488 acres.

Interim Results (six months period ended 31st March 2020) as reported on 30th June 2020

The Company formed a JV with Valkar named Greenfield Energy LLC. Greenfield will develop a plant using Oil Sands Technology at a location yet to be decided in Utah, USA. The Company would be required to contribute funds close to USD 1.5 million to upgrade Petroteq's existing oil sands plant (POSP) at Asphalt Ridge, Utah undertake the test programme and contribution to the FEED study. As part of the JV, Valkar will provide the services for FEED study of a value estimated to be USD 375,000, management and operating experiences and resources owned by Valkar. The Company is yet to secure the funding to contribute to the JV. The Company operations at Holliday A Block has been suspended, which required TurboShale's RF technology for the extraction of oil, for the rest of 2020.

Six-months performance ended 31st March 2020

(Source: Company Website)

Funding and liquidity position

In December 2019, the Company raised GBP 925,000 by issuing 142,307,692 new ordinary shares at 0.65 pence per share. The funds raised will be used for general working capital and engineering studies related to oil sands. As on 29th June 2020, the Company had a cash balance of GBP 340,000.

Share Price Performance Analysis

TomCo Energy PLC was down by 5.90 percent to trade at GBX 0.5881 per share (as on 1st July 2020, before the market close at 2:00 PM GMT+1). Stock 52 week High and Low were GBX 8.00 and GBX 0.312, respectively. The Company had a market capitalization of around GBP 4.07 million.

Business Outlook

The Company would require securing funds to contribute GBP 1.5 million as a part of its share to pursue Greenfield projects in JV. The Greenfield project will proceed once the funding is secured. The Company is likely to raise more funds for additional working capital and repay the debt when they are due. However, the Company speculate that due to the pandemic, it might be challenging for the Company to secure additional funding.

ADM Energy PLC (LON: ADME) – Recent listing on Berlin and Frankfurt stock exchange

ADM Energy PLC, formerly MX Oil Plc, is an oil and gas investment company. The Company has an interest in the Aje Field, in OML 113 offshore Nigeria. The Company owns two wells in the Aje Field (Aje-4 and Aje-5ST2).

Annual Results (period ended 31st December 2019) as reported on 30th June 2020

The Company reported the revenue of GBP 2.5 million, which decreased by 19 percent year on year. The loss after tax widened to GBP 1.7 million from GBP 1.0 million a year before. The Company did not declare any dividend for FY2019. In 2019, the two wells owned by the Company produced a total of 890,203 barrels of oil. The average production was close to 2,967 barrels per day. The Company raised a total of GBP 2.0 million from three funds issue.

The Company, along with the partners, is in the initial phase of planning for the development of the Turonian Aje gas project. The plan is to drill three wells in 2021 to increase the oil and gas production from 3,000 barrels per day to 9,000 barrels per day. The additional output will be supplied to West Africa pipeline and Lagos market.

Recent event updates

  • As on 25th June 2020, the Company got listed on Berlin and Frankfurt stock exchange.
  • On 27th April 2020, the Company secured a loan facility of GBP 200,000 and equity subscription by Directors of GBP 50,000. Besides, converted GBP 152,000 of debt to equity.
  • In February, the Company entered an agreement to increase the revenue interest in OML 113 from 5 percent to 9 percent. On completion of the contract between ADM Energy and EER (Colobos) Nigeria Limited, reserves will increase from 8.9 million barrels of oil equivalent to 16.4 million barrels of oil equivalent. The transaction is expected to be complete in Q3 2020.
  • In February the Company signed a strategic alliance with Trafigura to develop investment opportunities in the African energy sector.

Financial Performance for FY19

(Source: Company Website)

Share Price Performance Analysis

ADM Energy PLC (LON: ADME) was up by 6.90 percent to trade at GBX 3.88 per share (as on 1st July 2020, before the market close at 2:00 PM GMT+1). Stock 52 week High and Low were GBX 27.70 and GBX 1.80, respectively. The Company had a market capitalization of around GBP 2.69 million.

Business Outlook

The Company would focus on increasing proven and probable (2P) reserves and production. The Company will seek opportunities at low and attractive valuation projects as big upstream companies exit the West Africa market amid the current scenario.

Comment


Disclaimer