Does Canadian Overseas Petroleum’s beaten-down share price offer an opportunity?

Canadian Overseas Petroleum (LSE: COPL) has seen its value collapse over the past few months with its share price now just a third of the recent high it made in September. After peaking at 1.8p, a placing to raise £2.5m followed the next week at just 1p. With little news delivered since then, does the current share price of 0.6p price in the unknowns?

As if often the case on AIM, the market sharply adjusted its valuation towards the placing price.

In the placing RNS last October, the company stated it intended to use the net proceeds of the Placing to ‘fund the Company’s on-going general and administrative expenses’.

Canadian Overseas went on to state they amounted to ‘approximately US$410,000 per month, as the Company seeks to progress its projects in West Africa’.

That’s some cash burn – evidently, £2.5m isn’t going to last that long with that level of monthly expenditure.

At the time, Arthur Millholland, President & CEO, commented: “This Placing will strengthen our Balance Sheet while we concurrently work towards finalising the project financing, operations program and plan for our OPL 226 project offshore Nigeria.”

The market has been patiently waiting for news on progress but updates have been sparse. It’s unclear whether project financing will be secured at all and another placing to cover the company’s day to day costs could be on the cards soon.

More often than not, placings on AIM are discounted. A fundraise to buy more time without having secured the key project finance could be detrimental to the share price. If however, project finance is secured, I expect this one to move quickly from these beaten down levels.

Author: Stuart Langelaan


The author of this piece does not own shares in the company mentioned

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