88 Energy ($EEENF): What’s Next?
What a roller coaster ride. 88 Energy rose by more than 400% in the last few weeks only to fall by 80% after the Easter weekend. For those who took profits before the weekend, I applaud you. For the unfortunate and greedy ones, let’s take a peek at what might be in store.
At this point, it is common knowledge that drilling at the Merlin-1 well did not go as planned. Despite that, the company does not fail to point out that Merlin-1 has actually delivered by best outcome of any Alaskan wells it drilled in the past 6 years. For all new investors, let it be known that the company had no successful outcome on its Alaskan drilling operations yet.
The 37% chance of success for Merlin-1 outlined in their documents coupled with words such as “de-risked” heightened investor expectations, at least for the newer investors. Twitter did a great job at hyping up the stock, attracting the eyes of unfamiliar investors who unfortunately bought in the trend without doing any due diligence.
Moreover, Elko International, one of the major drillers for this project, took payment in form of 88 Energy common shares. 360 million of them at 1.8 cents. All of that gave strong indications of success. The thinking was why would the driller accept shares instead of cash if they were not confident in the company. There were rumours that the driller sold the shares near the new heights of the stock price. But I would not blame them for doing so.
I have been lurking the LSE 88 Energy forum and have learned quite a bit. As usual, we should take everything we see on the internet with a pinch of salt. Some users seem to have been invested in 88 Energy for the past 6 years. For our British neighbors, it’s certainly not their first roller coaster ride. They pointed out that it is common for CEO David Wall to hype up drillings and have had no outcomes at the end. So, what’s different this time? Well for starters, David Wall will step down in May this year. Apart from that, unless it is all a drape of lies, one of the zones tested during the Merlin-1 program is considered to be a new prospective horizon within the Nanushuk Formation that was not one of the pre-drill targets. I won’t bore you with technical details but what that basically means is there might be more oil than they thought. But the key word is might.
There has been a lot of rumors surrounding a buyout of 88 Energy by ConocoPhillips. Of course, they still remain rumors. In my view, a buyout will only come to light after 88 Energy manages to show hard evidence of oil underneath its fields. Some might say that the oil is already there.
But the key point is that they need to show hard proof for any potential buyer to become interested. The drilling season is over, and they are plugging the wells. If you have not sold your shares yet, I would personally hold on to it until they resume their activities by end of September.
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