written by reader Africa Oil AOIFF drop

By bkkben, November 27, 2012

Anybody having an idea as to what caused the fast drop in AOIFF yesterday – some rumors and then profit taking from the good run it had so far this year?

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Travis Johnson, Stock Gumshoe
November 27, 2012 11:47 am

This was pretty clearly profit taking on the announcement of initial results from their second well — sounded to me like the news was positive in that the reservoir was confirmed to some degree, but perhaps it wasn’t as exciting as some had hoped since there wasn’t the overwhelmingly large find that they had in their first hole. With a stock that’s up 500% in a year, a “kind of what was expected” result is probably enough to get a 20% selloff as folks book some profits.

They’re having a conference call to discuss the results right now — I’m not a geologist, so I’ll be interested to see what analysis comes out of this regarding the potential for the amount of oil, and we’ll be seeing more interim results as two more wells spud next month and they do further testing on these first two wells, so there will probably be additional volatility. I’ll try to listen to the recording of that call later in the week.

As long as each result seems to confirm a substantial amount of oil and “de risk” the reservoirs that they think are available in these rift basins in East Africa, I’m holding on with these “free” shares (I took my initial investment off the table early in the year, following the first good results) — but despite the fact that these shares have no cost basis for me, they are my largest holding (or second largest now, following that drop), so I am watching them but giving them a lot of leeway.

I don’t know if AOI is going to want to grow into a producer over the next three or four years, or if they’ll want to sell out to a major to do the development and production work — if the latter there could be an abrupt payday for shareholders, if the former there could be a couple years of ups and downs since I expect the process of building infrastructure and capacity to produce and export oil will be difficult and slow.

They’ll have a secondary offering to raise money at some time in the next few months, so that will impact the shares as well … though who knows what the price will be at that time. I’m neither buying nor selling right now.

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👍 18054
November 27, 2012 12:22 pm

Thank You, Travis, I am hanging in there for a while at least. As usual I was a bit quick on the draw, ( i have to work on that) but all is not lost. You told us from the beginning it could be a bumpy ride, just did not know it was that bumpy!