Late last week the shares of Mosman Oil & Gas (LON:MSMN) put on a 15% spurt in its ‘penny share’ price.
Capitalised at just under £6m, the Australian-based company is looking very much more interesting of late.
The Business
It is a helium, hydrogen and hydrocarbon exploration, development and production company with projects in the US and Australia.
Mosman has several projects in the US, in addition to exploration projects in the Amadeus Basin in Central Australia.
Pivot Swing To Helium
The company’s strategic objectives are to identify opportunities to provide operating cash flow and have development upside, while also progressing with exploration of existing exploration permits.
It is now focusing on helium, hydrogen and hydrocarbon exploration development and production.
The Amadeus Basin has some of the highest recorded % of helium and hydrogen anywhere in the world.
It is one of the most prospective onshore areas in Australia for helium, hydrogen and hydrocarbons and has established infrastructure with production from Mereenie, Palm Valley and Dingo oil and gas fields.
Analyst’s View
Analyst David Mirzai at SP Angel considers that the company is currently pivoting its strategy to focus capital and management resources on its existing helium interests in Australia and recently acquired interests in the USA.
He notes that Helium exploration activity on Mosman’s Australian assets is fully carried by its farm-in partners, while the recent US entry has modest near-term drilling costs funded by the proposed sale of the majority of the company’s US oil and gas production assets.
Following a corporate review and refreshed executive, Mosman has acted to reposition the portfolio with a strategic focus on helium opportunities, where it has been able to leverage helium exploration expertise gained over several years in Australia to identify quality helium projects.
The analyst states that:
“In our view, Mosman is pursuing a differentiated strategy in building a portfolio of exploration opportunities in areas with proven high helium concentrations located in OECD countries with the necessary infrastructure.
The company believes it is relatively undervalued compared to internationally listed helium peers, and with a more diverse prospect portfolio.”
The Equity
There are some 12.821m shares in issue.
The larger holders include Hargreaves Lansdown (23.25%), Interactive Investor Services (20.83%), Barclays Direct (9.69%), Vidacos Nominees (8.80%), and HSDL Nominees (8.26%).
My View
At this stage, despite the shares having quadrupled in price this year, I am taking the view that its Management is right in concentrating on building up its helium projects, and that its shares are headed higher.
The demand is growing and so too are the market prices for the gas.
Following the disposal of its working interest in various Texas leases, the company will have released cash as working capital as well as giving its teams more ability to concentrate on the helium side.
For risk-tolerant speculators, the shares could well prove to be a good one-year gamble from the current 0.046p, perhaps a doubling in price?
