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Chariot Oil and Gas share price drifts lower – what’s holding it back? (CHAR)

09 Jul 2018 | by: James Moore

The current share price of Chariot Oil and Gas (LSE:CHAR) of 7.95p is a far cry from the highs of around 23.5p hit 6 months ago. While the discount appears to push the stock into bargain territory, it may be wise to err on the side of caution. As we suggested last month, a placing may be in the wings, and the last one wasn’t handled well – A placing price of 13p devastated the stock’s price and sentiment, giving a huge 36% discount to placees.

Chariot raised £15m in the placing in February, but by our sums, post-drilling Prospect S the company will have just $8.9 cash left, leaving it exposed in the event of drilling failure. It makes more sense to raise money now while the Market Cap is around £28m ahead of the drill. Waiting to do the fundraise during the build-up of anticipation for the drill is a possibility, however, sentiment remains damaged after such a giveaway placing price last time around burnt many shareholders.

There is, however, a bull-case – if Chariot is able to secure a farm-out agreement for one of its projects then the threat of a fundraise would be lifted and sentiment could return. If the concern over financing can be exorcised, an initial target from a technical point of view could be a gap fill to 11.5p – Of course, if the drilling of Project S is successful then and a test of previous highs could also be on the menu.

As it stands at the moment though, the stock price is being pinned down by a diagonal downward trendline and a Descending Triangle looks to be forming as the share consolidates. This is usually a continuation pattern and if the price breaks to the downside, potential areas to be tested include horizontal support at 7.1p, 6.45p, and a key level at 5.27p.

Author: Stuart Langelaan

The author of this piece does not hold a position in the company covered in this article

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This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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