Oil company NU-Oil and Gas (NUOG:AIM) gains 25.6% to 0.52p as the micro-cap agrees a deal which could deliver renewed production from its Newfoundland assets while reducing its capital commitments.
Formerly Enegi Oil, the company has struggled with its finances as efforts to get its marginal fields solution off the ground have been frustrated.
PLANS FRUSTRATED
This plan, being executed through its 50%-owned venture Marginal Field Development Company or MFDevCo, is to use unmanned buoys to reduce the costs of production from fields which would otherwise be sub-commercial.
The post-2014 collapse in oil prices was unhelpful but in October 2016 the company raised £0.7m to fund its activities here off the back of an engineering agreement with service group Aibel.
On 26 January MFDevCo executed a collaboration agreement with COSL Drilling Pan Pacific - a subsidiary of Chinese state oil firm CNOOC.
RESOURCES FREED UP
This latest deal should free up resources for the marginal field effort. A production sharing agreement with PVF Energy Services will see the latter cover 100% of the costs of a work programme to restart production from licence PL2002-01(A) with NU-Oil receiving 50% of the net revenue from any output. Work is planned to start in the second quarter.
Beaufort reiterates a ‘speculative buy’ rating on the stock. Any investment in NU-Oil is likely to be highly speculative and it is worth noting the trajectory of the shares. Raising £15m alongside its March 2008 IPO at 181p the shares are worth just a fraction of that total now.
Results for the six months to 30 June revealed liabilities of £3.2m, mainly relating to a loan to Shard Capital Management.
The company said that ‘at this time neither Shard nor related parties have sought to recover these debts and it is expected that they will continue to support the group'. If this situation were to change shareholders could be looking at heavy dilution.
