15 October 2018, News Wires — Higher oil prices may seem like the pot of black gold at the end of the rainbow for wildcat explorers in frontier plays. But even with talk that prices of $100 a barrel could again be in sight, investors are wary before taking the gamble, Bloomberg reports.
With crude above $80 a barrel small explorers are taking chances even when the price of failure is high. But investors have lost patience with risk-taking companies in recent years, says Anish Kapadia, an analyst for Hannam & Partners LLP.
“There were a lot more funds that would hold these stocks five-plus years ago, for example a lot were held in the U.S.,” Kapadia said. “But the size of these companies and lack of trading liquidity precludes many investors from holding them.”
The latest example of the pitfalls for investors — even with crude at a four-year high — is Chariot Oil & Gas Ltd. This company was testing a hunch with its well over 4,000 metres deep offshore Namibia — a frontier play that has caught the interest of majors BP Plc and Exxon Mobil Corp, but remains largely unproven. The results didn’t support the hunch which was “very disappointing,” Chief Executive Officer Larry Bottomley said in an interview.
Chariot stock fell as much as 70 percent on Thursday after the results announcement. Bottomley tried to ease investor concern, saying the company is fully funded to make progress on assets in Morocco and Brazil. Analysts were less enthused.