Is volatile 88 Energy Ltd a falling knife to catch after dropping 25% today?
The share price of oil and gas exploration company 88 Energy(LSE: 88E) is among the biggest fallers so far today. It is down over 25% after the company released an update on its Icewine operations. Clearly, investor sentiment has been negatively affected by today's update, but could this mean there is a stronger buying opportunity available for long-term investors? Or could the company's share price decline yet further in the near term?
The company's update did not appear to contain any particularly negative news. Flow testing on Icewine-2 restarted on 31 August after a seven week shut-in. The well is currently flowing back frack fluid at a rate of around 70 barrels of oil per day (bopd). Thus far, only minor hydrocarbon indications have been seen via the formation of gas hydrates within the choke manifold. As well as this, pressure data analysis has suggested there is limited connection to the reservoir prior to the last 24 hours.
Today's update does not seem to be particularly positive or negative overall. 88 Energy continues to make progress with its strategy, and today's share price fall may be due to high expectations from investors. The market may have been anticipating a more positive update than that which was released today. This could explain why the company's share price has declined dramatically following the update.
This could create a buying opportunity for long-term investors. The company's prospects have not worsened following the update, and yet it trades on a much lower valuation than it did at the end of the previous trading session. Certainly, the oil price may remain volatile and an oil and gas exploration company such as 88 Energy is highly dependent on news flow in the near term. But for investors looking for a small exploration play, it could prove to be a relatively sound buy after today's share price fall.
One stock recording a share price gain today is Aminex(LSE: AEX). The oil and gas exploration company's stock price is 10% higher after it released an update. There has been a material increase in its management estimate of gas initially in place (GIIP) in its Ntorya appraisal area in the onshore Ruvuma Basin of Tanzania.
The company has upgraded its unrisked resource estimates from 466bn standard cubic feet (BCF) Pmean GIIP, to around 1.3trn standard cubic feet (TCF) Pmean GIIP. Encouragingly for the company's investors, these estimates relate to the Ntorya appraisal area only, and do not include the potential of the adjoining exploration acreage.
Looking ahead, Aminex is seeking to begin gas production from the licence as quickly as possible. While its share price could remain volatile, it appears to be benefitting from improving investor sentiment. With a sound strategy, it could deliver further share price growth in the long run.
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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.