Oil and gas: 88 Energy tumbles, but these two plays are on a run on the ASX
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This morning has been a volatile one for the small cap oil and gas sector on the ASX with three stocks falling by over 60 per cent and four others making the top 10 in early trade.
One of the ASX’s losers in oil was 88 Energy (ASX:88E) which rose from 0.8 cents in early March to over 7 cents just prior to the Easter break.
The company has exploration ground in Alaska and grew off the back of drilling updates in March.
But this morning it plunged after revealing a number of setbacks including an equipment failure and wellbore condition issues.
88 Energy has been unable to obtain hydrocarbon samples from its two most prospective zones and while this has not ruled out the Merlin-1 well as an oil discovery, it will have to undertake analysis of sidewall cores and potentially carry out further drilling to confirm this.
Additionally, while the presence of hydrocarbons in samples from less prospective zones was encouraging, the company says saturation levels were too low to constitute a discovery.
The managing director of Sacgasco himself, Gary Jeffery, admitted recent drilling results at the Borba well in California were “unexpectedly disappointing”.
Drilling took longer than expected and the company saw lower reservoir quality than expected.
However Jeffery said that its Canadian assets – which are at the production stage – were generating cash and the first revenue fields would be released shortly.
As well as this, oil and gas prices have been on the rise ever since its most recent asset acquisitions and it is assessing acquiring others.
Both companies more than halved this morning.
However the oil and gas sector saw some winners as well.
The latter of these stocks announced that the US$2.2 million purchase of GSPC’s 55 per cent participating interest in the Cambay PSC in India has been approved.
Following the approval, Oilex now has a 100 per cent participating interest in the project.
Managing director Joe Salomon said this was a major milestone achievement. The transaction is expected to complete this quarter.
As for Fremont Petroleum (ASX:FPL), it appointed a new chairman in 25-year industry veteran Simon Johnson.
Johnson has worked as an executive at several oil companies including NYSE-listed Borr Drilling, Noble Corporation and Seadrill.
He replaces current chairman Peter Crown who will stay on the board as a non-executive director.
Fremont rose by 17 per cent while Oilex rose by over 66 per cent this morning.