Zak Mir’s Top Pick Special
Recent Significant News:
Fundamental Analysis:
April 26th: AIM-listed onshore hydrocarbon producer IGas Energy intends to drill two additional wells commencing this year so as to further appraise potential resources in the Bowland Shale, an area in northwest England home to large quantities of shale rock.
To my mind as a relative late comer to the AIM stocks area in general, one of its current great white hopes at the moment is IGas. It has to be admitted that the word “risk” really comes into play here however. There are not only the usual pitfalls of being involved in a resources play – with all the questions over cash being delivered out of the ground or not, but of course you never know if / when a new placing is just around the corner... We assume that the money raised at the start of the year will however tide IGas over for the near term.
January 15th: IGas is proposing placing up to 24.3 million new ordinary shares at 95p, with new and existing institutional investors to facilitate investment in IGas’s shale resource. The issue represent approximately 15% of the company’s existing issued share capital and is being conducted through an accelerated book-building process.
December 21st: IGas Energy, which has a share of the huge Bowland rock formation in the North West, bought Star Energy a year ago, and said it is in the process of acquiring other UK conventional onshore assets in West Sussex. These should provide it with enough cash to allow the company to continue with the shale prospect. Interim figures to the end of September show positive cashflow of £15.5m, The Times.
Nevertheless, this is just about as cautious as it is in my nature to be regarding this company which seems to be at the Zeitgeist of the E&P boom, both in the real world and amongst investors, especially given the way that the epicentre of interest is Fracking / Shale Gas extraction. The best case scenario here over the next decade is that a successful campaign by the likes of IGas onshore UK could have the type of transformational effect on the UK in the 2020’s as North Sea Oil did to prop up Thatcherism in the 1980s. It is estimated that the 300tln cubic feet of shale gas under this country could provide over a century of supply.
Given such a mega fundamental backdrop it appears somewhat churlish for me to quibble about the inclusion of IGas but, as things stand, we have a typical high risk / high reward resources play, one that is gilded with more upside than most minnows in my opinion, but after the lifting of restrictions on exploration for shale gas announced by the UK Government on December 13th will likely prove to be irresistible to compulsive small cap punters...
May 2013
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