This TabStocks article takes an in-depth look into the 88 Energy stock.
Our analyses explores whether 88 Energy Stock a Buy in 2022 as a result of the energy boom
Stock Name and Stock Trading Exchange Platform
88 Energy Ltd – Australian Stock Exchange (ASX: 88E)
– London Stock Exchange (LSE: $88E)
– US OTC Markets Group (US: $EEENF)
The Stock Sector
88 Energy is an Australian company that is focused on and operates primarily in Alaska as an oil exploration company. They are located in the Alaskan central North slope where they explore across 440,000 net acres.
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88 Energy are currently working in four highly prospective areas namely: Project Icewine, Yukon leases, project Peregrine, and the Umiat oil field.
The 88 Energy company is the operator across all of its portfolio of word-class exploration assets.
Its purpose is to be a successful exploration and production company that delivers to shareholders whilst improving the development in its operating regions.
They support and follow the ESG (Environmental, Social, & Governance) framework and have adopted eco-friendly operations. The company was founded on 21 February 1996, and is headquartered in Perth, Australia.
Recent News on 88 Energy
The company announced earlier this month that it has completed a mapping program at project Icewine in Alaska.
The program revealed that reservoirs from nearby locations extend into project Icewine. This new later sent their shares tanking by 8%.
This has been an interesting development considering shares were up 10% last month after the preliminary mapping of the Icewine project.
This seems to be a common pattern in the company and the energy sector by extension. A single undertaking can make or break them.
The most anticipated project by the company this year was the exploration of the Merlin 2-well in Alaska.
The project began in March this year 2022 going through the operational phases of profiling, spudding, mudlogging, drilling, and more.
Similar to the Icewine case, shares rose after the news was revealed, but came crashing down after they demobilized from the well, essentially abandoning it after unsuccessful outcomes.
Following the stock falling by about 52% after Merlin, short interests were reported to be on the rise for 88 Energy stock.
On the bright side, the Nearology report has enhanced Alaskan acreage for the company. They have pleased by this move and look to expand exploration.
The oil markets have been on a run following the global shortage. 88 Energy has gained attention as investors look for discounted energy stocks.
The oil explorer also received its first pay check on a project in Texas. It has lifted production in the Permian basin to focus on its Alaskan reserves. A significant sum of A$600K was disbursed.
Current Position of 88 Energy
88 Energy is a very rapidly growing resource company. It currently has a market capitalization of $132M which is a decline from its highs.
It is still in the exploration phase thus it has not had the chance to generate revenue. This also leads to boom and bust cycles with every discovery they make.
It is at the point of reaching sustained production, at which it could stand to make insane returns. Oil-producing firms have dominated the market in the wake of the crises and rising crude prices.
A fine example of this is Saudi Aramco becoming the most valuable company in the world at the moment with a market cap of $.2.4T.
It is costly to drill and explore oil, which gets even dire if the activity is futile, ending up in a dry well. This is unfortunately the fate of most drillers.
It is an opportune time in the market for oil sellers, as the market is usually very unstable.
Just two years back with the pandemic ravaging the globe, crude was selling at negative due to the lockdown, flash forward to the present day and historic high prices are recorded.
This window ought to be capitalized on as swiftly as possible before a reversal in the trend. 88 Energy has come to this realization and they are operating as fast as they can.
Investor confidence in oil is strong at the moment and this is good news for the drillers.
Huge chunks of capital are rushing their way. Projections for 88 Energy show that they are at a breakeven point at the moment.
They have been in stealth mode for a long time and they must start to post positive figures. 2022 is the year that this long-awaited promise could be fulfilled.
Analysts have done the math and the results show a 161% growth in their margins.
This was using a line of best fit. An estimated 12 months is expected for the company to take a positive turn.
These are of course theoretical abstract models and uncertainty always exist in the market. The estimates could be over-optimistic, thus achieved much later than the forecast.
All the same, this is a great signal for 88 Energy as a potential ace. The artic circle in Alaska is geologically rich in hydrocarbons, formed by tectonic activity in the Paleozoic period.
88 Energy Stock Price Chart
As of 20 May 2022, $EEENF closed at $0.00082, up by +1.47 from the previous day’s close.
It has traded at a day range of $0.0080- $0.0086.
The stock has been at a 52-week range of $0.0065-$0.0410. It hit a high of $0.0105 in the past month, courtesy of the surge in energy stocks.
It is seen above how the geopolitical tension caused a rally in the oil sector. 88 Energy has however collapsed due to its unfruitful exploratory activities (Merlin well).
Heavy shorting of the stock has caused it to additionally sink. The volume of shares traded is now at 12.9M less than the average volume of 58M.
The share price is at low levels right now, which justifies the price to its fair price.
Technically 88 Energy is way below intrinsic value, considering it is a penny stock and has just crashed. It has all the room in the world for growth, especially in these energy needy times.
If 88 Energy manage to scale to mass production, an explosion of the stock will be inevitable.
Sentiment on $88E
Many investors view the stock as a potential value play. The booming energy sector speaks for itself. The crash experienced recently due to the plug from the well was after the appraisal.
Experts see 88 Energy as a risky investment with huge upsides. It is a high-risk/high-reward investment. Even though it crashed by at least -50%, it can rebound.
The sky has not fallen yet, even as other investors may claim the oil industry is set to perish. Recent developments have revealed the necessity of black gold in the market.
The 88 Energy stock is relatively tied to the market and will generally follow that direction, which is not very secure. But their activities also affect the direction of the stock as seen in the crash.
Profits for $88E
The company is at a critical juncture in its growth. This is called the breakeven point which has been talked about much by the analysts.
It is speculated to achieve profitability come next year 2023. This has kept investors anxious, especially long-time holders who have stuck with the stock for years.
They did post a gross profit of -$61k for 2021, which was a +14% increase. The net loss has however been decreasing over the years and the new turn towards the greenside is anticipated.
The most impressive fact about the company that has undoubtedly captured the attention of investors is that it operates debt-free.
This is remarkable showing that all of 88 Energy funds come from their investment activities.
If 88 Energy does breakeven, it will be a gold mine for shareholders.
Future of 88 Energy
Overall it is not possible to know where this stock is heading. It is in one of the most rigorously unstable markets with booms and busts that occur every so often.
The case is even tougher for drillers who have the risk of not finding oil. 88 Energy does have an advantage as the arctic circle is known to possess substantial reserves.
Even better, little exploration has been done in the region, and now is the best time for hydrocarbon production.
88 Energy face environmental threats from regulators, but they have assured investors and the oil market that they operate cleanly and feasibly.
They are small which gives 88 Energy a wider growth opportunity compared to big oil giants.
Their low overhead of three employees allows 88 Energy to outsource third-party contractors thus decision-making is faster.
The world still needs hydrocarbons and potential miners like 88 Energy that strike it big will be greatly advantaged.
Overall Verdict on 88 Energy
Analysts expect the explorer to grow rapidly bringing in profits of A$2M and thereabouts in 2023. It has been noticed by traders in following huge short interests.
Many will be quick to notice the fall as a good entry point to buy 88 Energy shares cheaply. It is a recession-proof industry that will always sell as oil is an essential resource.
Moving averages indicate a strong sell, while oscillators indicate a buy. The stock is unquestionably a buy, it is at a record low and gathering strong momentum.
A buy to hold long term is the way I’d invest in 88 Energy.
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