Is it make or break for Xcite Energy limited, Rockhopper Exploration plc & Gulf Keystone Petroleum Limited?
After a couple of days above $50, the price of a barrel of Brent Crude has dropped back to slightly under $49, but the trend that has seen a rise from under $28 in January is still looking reasonably solid. That's provided a boost in confidence for the big dividend paying giants like BP and Royal Dutch Shell, and it's taken a bit of pressure off indebted mid-cap players like Premier Oil and Tullow Oil. But what's it doing for the small-cap tiddlers?
Xcite Energy(LSE: XEL) hasn't benefited from the oil price rise of late, with its shares down 66% over the past 12 months to 12p, and down 83% over two years -- and since the shares' low on 20 January, we've only seen an 11% recovery.
Although rising oil prices should help and Xcite has some interesting North Sea prospects, the North Sea isn't among the regions of the world with the lowest costs of production. In fact, in its Q1 update from just a week ago, Xcite confirmed that it had only $14.13m in cash at 31 March, and that it is in negotiations with bondholders over bonds due for repayment on 30 June -- they were issued two years ago, and the firm admitted its "current and forecast cash position is insufficient to repay the Bond capital in full by 30 June 2016´´.
Shares in Rockhopper Exploration(LSE: RKH) have also slipped in the past 12 months, by 53% to 38p, but at least in this case we've seen a 54% recovery since their January low. Although Rockhopper really needs the oil price rise to keep on going for quite a bit longer, the Falklands-focused explorer does appear to have enough cash to keep it going at least in the short term.
At the end of last year, Rockhopper was sitting on cash of $110m, and though some of that will surely have gone by now, the prospects for the firm's Sea Lion field and Isobel complex, reported by an independent audit mid-May, surely boost confidence in the firm's future. In fact, chief executive Sam Moody said that "In our view this new audit confirms the potential of the North Falklands to be a billion barrel basin", and that sounds like the kind of thing that would even attract future partners should more funding be needed.
End of the line?
But then, sadly, I turn to Gulf Keystone Petroleum(LSE: GKP), whose shares continue to languish at around 4p apiece -- that's an 88% drop in 12 months, and a 99% loss since they peaked back in the heady optimistic days of 2012 when oil fetched a packet on the market.
Gulf's problems have been compounded by operations in the Kurdistan region of Iraq, and by the government just not paying for the oil it was taking from the company for export. Regular payments were finally agreed and are ongoing, but there's been nothing forthcoming towards the arrears yet and there are massive debt repayments needed -- of $250m in April 2017 and $325m in October 2017.
There are various standstill arrangements in place, but something drastic needs to happen if Gulf Keystone is to be saved. Unfortunately, all I can see is a deal that results in bondholders getting pretty much the whole company and current shareholders being left with little more than headaches -- though I do hope to be proved wrong.
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Alan Oscroft owns shares of Premier Oil. The Motley Fool UK has recommended BP and Royal Dutch Shell. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.