Stocks’ Details 

Norwest Energy NL

Progress Achieved on Exploration Well: Norwest Energy NL (ASX: NWE) is engaged in the exploration of petroleum resources. The market capitalisation of the company stood at ~$18.94 Mn as on 17^th September 2020.

Response to ASX Price and Volume Query: Due to the change in the price of the company’s securities from a low of $0.003 on 16^th September 2020 to an intra-day high at the time of writing of $0.005 on 17^th September 2020, the company released an ASX price and volume query. The company stated that several ASX-listed junior oil & gas companies have witnessed similar price movements after a recent announcement of the federal government to promote natural gas as a primary driver of economic recovery.

Submission of Environmental Plan Application: Recently, the company released its operating activities for June 2020 quarter, wherein, it notified that operator energy resources limited (ERL) has achieved a progress on preparations for drilling of the high impact Lockyer Deep-1 exploration well, which is located within permit EP368. The company added that the environmental plan application has been submitted to the Department of Mines, Industry Regulation & Safety (DMIRS), and long lead items have been ordered. The net cash used in the operating activities stood at 16K, during the quarter. In the month of April 2020, the company received $191,789 as a tax offset under the R&D Tax Incentive Scheme related to the 2019 Xanadu 3D Transition Zone seismic program. NWE closed the quarter with cash and cash equivalents of $3,055,000.

Cash Flows (Source: Company Reports)

What to Expect: In the month of October 2020, the company is expecting to receive a further amount under the R&D Tax Incentive scheme, which is related to eligible R&D expenditure associated with the seismic program incurred in FY20.

Stock Recommendation: The stock has moved up by 33.33% and 60% in the past three and six months, respectively. In addition, the 52-week low-high range for the stock stands at $0.002-$0.008, respectively. The stock is trading at a price to book value multiple of 5.0x against the industry median (Oil & Gas) of 1.4x on TTM basis. On a technical front, the stock of NEW has a support level of ~$0.0030 and a resistance level of ~$0.0060. Therefore, considering the recent support by the Federal Government, we will keep an eye on the business activities of the company, and hence, suggest investors to avoid the stock at the current market price of $0.005 per share, up by 25% on 17^th September 2020.

Key Petroleum Limited

Placement of Shares to Support Future Growth: Key Petroleum Limited (ASX: KEY) is in oil & gas exploration with a market capitalisation of ~$13.78 Mn as on 17^th September 2020.

Divestment of Interest in WA-481-P: On 8^th September 2020, the company notified the market, regarding the sale of its 40% interest in permit WA-481-P to Pilot Energy Limited. Under the sale deal, Pilot Energy Limited will issue 21 million fully paid ordinary listed shares to KEY, which is subject to approval of Pilot’s shareholders. The transaction is likely to be completed in 3 business days following the satisfaction of all conditions precedent or at a date agreed in writing by the parties. The company had appointed Mr Geoff Baker as Chairman of the company, who has been a Non-Executive Director since March 2015.

Completion of Placement to Sophisticated Investors: During June 2020 quarter, the company experienced game changing potential from the evaluation of the High Cliff and Kingia plays on the Bookara Shelf (EP 437/L7) and the broader perspectivity of the northern Perth Basin. KEY reported exploration costs of $163,000 with a significant portion of the expensed costs relating to decommissioning costs which have been recovered by way of rehabilitation refunds. In addition, the company finished a capital raising through placement of 256,686,277 ordinary fully paid shares at $0.0025 each, to raise A$641,715.69 (before costs). KEY ended the quarter with cash on hand of $642,000, with reimbursement of rehabilitation funds of $328,000, and receipts of $19,000.

Cash Flow from Operating Activities (Source: Company Reports)

Outlook: For the September 2020 quarter, the company continue to monitor the COVID-19 pandemic, and associated restrictions, with an objective revert to previously planned operational schedules. The company is also focused on Bookara Shelf 3D seismic survey acquisition planning and stakeholder engagement.

Stock Details: On 17^th September 2020, Key Petroleum Limited requested ASX to grant trading halt on its securities pending a response to a Price and Volume query received from ASX. The trading halt will be lifted earlier of commencement of normal trading on 18 September 2020 or when the response from the company is announced on ASX. The stock last traded at $0.008.

Red Sky Energy Limited

Focus on Value Accretive Acquisition Opportunities: Red Sky Energy Limited (ASX: ROG) is an energy company, which has been established to acquire, explore, assess, and exploit oil and gas deposit and solar opportunities. The market capitalisation of the company stood at $6.11 Mn as on 17^th September 2020.

Increase in Losses during 1H FY20:  During 1H FY20, the company reported interest revenue of $326 against $45 of 1H FY19. The company recorded a net loss of $333,976, as compared to $836,234 in 1H FY19. At the end of half-year, the company had net current liabilities of $743,837 and posted net cash outflows from operating activities of $149,806.

Key Financial Summary (Source: Company Reports)

Completion of Placement: In the month of August 2020, the company has raised A$400,000 (before costs) through a share placement to sophisticated, professional and other exempt investors. The placement comprised of 400,000,000 fully paid ordinary shares in the company at an issue price of 0.1 cents ($0.001).

Growth Strategy: The core aspect of ROG’s growth strategy revolves around capitalising on the number of value accretive acquisition production opportunities, which continue to present themselves, whether undeveloped or underperforming.

Stock Recommendation: The stock of ROG has moved up by 50% and 100% in the past one and three months, respectively. In addition, the stock is trading at a price to book value multiple of 8.7x as compared to the industry median (Oil & Gas) of 1.4x on TTM basis. On a technical front, the stock of ROG has a support level of ~$0.0020 and a resistance level of ~$0.0040. Therefore, considering the low market capitalisation, valuation on TTM basis, fluctuations in top-line and bottom-line and high debt to equity, we suggest investors to avoid the stock at the current market price of $0.003 per share on 17^th September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.