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?
Cheers!

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.

guest

12345

This site uses Akismet to reduce spam. Learn how your comment data is processed.

12 Comments
Inline Feedbacks
View all comments
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.

Add a Topic
5971
Add a Topic
359
Add a Topic
359
πŸ‘ 16022
herbalix
Irregular
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!
Herbert

πŸ‘ 171
Travis Johnson, Stock Gumshoe
November 27, 2012 12:47 pm
Reply to  herbalix

Despite being a $2 billion company, there’s plenty of room for dramatic moves — and there remain big picture risks, too, beyond the simple risk of bad drilling results. I particularly worry about political risk in a country that is picturing substantial oil wealth where there has been none before — Kenya is quite stable and advanced, particularly in comparison to some of their neighbors, but they don’t really have an energy policy, and we have only to look at Mongolia to see what happens when politicians think they’ve been screwed out of “their” resources.

Add a Topic
359
Add a Topic
2781
Add a Topic
2781
πŸ‘ 16022
John Harris
Member
John Harris
November 27, 2012 12:31 pm

I bought in at $1.50 and sold about 3/4 of my initial lot somewhere over $7 (with a stop loss that was risky for any thinly traded stock – but I was having a hard time beleiveing it was not just a pump and dump stock, so I put in the trailing stop. It took a quick dip one day (down to around $3) and stopped out but by the time my shares actually sold the dip recovered and I got a nice profit – so now like Travis, I am holding on to free shares and will let them ride. But I too looked at the news yesterday and nothing seemed to justify the drop. Thanks for you explanation Travis.

Add a Topic
5971
Add a Topic
5971
Franklin
Guest
Franklin
November 27, 2012 4:59 pm

Travis, thank you, indeed, for your response!

πŸ‘ 18
Don Fidlow
Guest
Don Fidlow
November 29, 2012 5:06 pm

the AOIFF drop off was an overnight (prearranged ) private placement at $7.50 p/ sh. AOIFF netted $ 300 million . To kee p them and Tullow ( its 50% owner & drilling partner ) in drilling money fo r years

fischershaw
Member
fischershaw
December 13, 2012 9:58 am

Or is it that the party is over and the stock is returning to the $1.50-$1.75 level? Not to be too pessimistic, but I imagine that some hype followers are pulling out after having inflated the price.

Add a Topic
5971
πŸ‘ 38
Travis Johnson, Stock Gumshoe
December 13, 2012 10:13 am
Reply to  fischershaw

It shouldn’t return to the pre-drilling level, to be sure, since they did find a lot of oil. But other than that, there’s a lot of variation in the possible valuation you can ascribe to this company … and certainly an incredible amount of selling pressure right now. Whether it’s because of year-end selling or disappointment with the results or the market smelling bad future results, I don’t know. I haven’t seen a fundamental reason to drop my “let the profits ride” strategy on my AOI shares, but it has indeed been ugly for the last couple weeks.

Add a Topic
359
πŸ‘ 16022
fischershaw
Member
fischershaw
December 13, 2012 10:15 am

Ah, then the perfect storm: Fiscal Cliff, end of year, hype followers pulling out. So then a possible buying opportunity approaching…

πŸ‘ 38
Travis Johnson, Stock Gumshoe
December 13, 2012 12:34 pm
Reply to  fischershaw

That very much depends on future drilling results, they’re years away from any actual production so this is a speculative stock whether it’s a $500 million company or a $2 billion company. The big secondary offering was clearly a downdraft as well, though now they’ve got plenty of money to keep exploring.

Add a Topic
5971
πŸ‘ 16022
jim peters
Guest
February 16, 2013 4:58 pm

VIDEO 16th Feb North Africa and the Eastern Mediterranean – an exploration β€œSpring”?
http://www.directorstalk.com/orth-africa-and-the-eastern-mediterranean-an-exploration-spring/

Add a Topic
22