Otto Energy complete punt/gambleHello all,
I would not normally be looking at a stock like this but I stumbled across and thought it was worth sharing for those who like a gamble every so often. Otto Energy is an Australian company and like a lot of oil producers they have not had a good year. Their claims are concentrated in North America and have partnerships with several different companies (Byron, Hilcorp, Talus).
There's not much good news here right now and the share price reflects this, they have cash runway to do them for a year or two due to a 25 million loan (with 10 million option) over 36 month term at 8% int, which they seem to be able to pay at the moment. They are losing money and will continue to do so for the rest of the year and possibly beyond.
So why would I be interested in this company.... potential.
Due to Covid things are tough (they stopped one of their exploration wells) and prices are terrible due to oil price war but things will get better for oil companies. The loan they have means they can continue to explore on their other wells and Q3 and Q4 see new drilling coming onstream. Some intelligent hedging means they are not as exposed as they might be to the current price fluctuation so they still have an income stream and they have managed to cut their costs almost in half, I like a company that can tighten their belt when it needs to.
Overview of Operations
SM71 Lighning Green Canyon Gulf Coast
Ownership 50% 37.5% 16.6% 37.5%
Metric Producing Producing Development Exploration
Operator Byron Energy Hilcorp Talos Hilcorp
Status 3 wells producing 2 wells producing Oil disc being completed 3-4 wells in package 1 to be drilled in
1 Temp abandoned Prod expected Q3 2020 late 2020/ early 2021
So this is my idea, I invest 100 euro:
Scenario 1 - Green Canyon and Gulf Coast do not return anything, they eat up all the cash reserves and the loan cannot be repaid without selling assets and company goes into liquidation
Scenario 2 - Cash runway is enough to get Green Canyon producing and oil price starts to rise again, stock rises to the first level and I make 600% = 60K euro
Scenario 3 - Oil prices rise significantly over the next two years, Green canyon and Gulf coast both fulfill their potential from the seismic scans and shares rise to second level and I make 2000% and I make 200K euro.
Can I do without the 100 euro.... yes, after seeing this gamble would I be able to live with myself if it went up to 2017 levels and I didn't put the 100 euro in ... no.
There is plenty more reading in the quarterly report, do your own DD as I am clearly not a professional.
Complete punt but in 10 years it could help me retire who knows?
Happy trading people
