, Ascent Resources (LON:AST) and 88 Energy (LON:88E) were flat or down despite a strong rally in oil prices.){kind=link}
Shares in junior oil companies LGO Energy (LON:LGO), Ascent Resources (LON:AST) and 88 Energy (LON:88E) remained flat on Monday, despite the price of oil rallying over 3 percent in early London trading.
The rally followed an announcement from Saudi Arabian and Russian oil ministers, who confirmed that they would add a nine month extension to the production cut agreed last year.
The weakness in the junior oil companies was a stark contrast to FTSE 100 miners BP (LON:BP) and Royal Dutch Shell (LON:RDSB) who rallied 1.3 percent and 1.4 percent respectively.
OPEC cuts not enough?
OPEC originally agreed production cuts last year, after the price of oil languished and the government budgets’ of oil producing giants Russia and Saudi Arabia were being squeezed by the low price.
Oil prices rallied over 20 percent in the wake of the initial deal but prices have slipped in the two months since, with increasing production in the US causing another supply glut. The Baker Hughes rig count rose by nine last week to 715, the highest level for around two years.
Junior oilies left out of the party
UK oil stocks have largely recovered from their worst levels seen in early 2016 when oil hit $26 per oil per barrel. However many junior oil stocks have not joined the party with LGO Energy (LON:LGO), Ascent Resources (LON:AST) and 88 Energy (LON:88E) trading well below 52-week highs.
The lower price can be blamed for share price woes as many smaller oil companies have been financially ravaged by a drop in revenue and forced into crippling arrangements or capital raisings.
LGO Energy (LON:LGO) said in their 2016 annual report they were ‘materially’ impacted by a default on a arrangement which resulted in a slash to production at the Goudron field.
Despite the downbeat results, VSA Capital have a buy rating on the LGO Energy with a price target of 22p. VSA Capital acted as a financial adviser to LGO when they completed a £2.5 million placing earlier this year.
Ascent Resources (LON:AST), who are locked into a dispute with Slovenian courts over a gas facility, also issued equity this year in the form of exercised convertible notes and a placing. Ascent Resources (LON:AST), are down over 40 percent from their 52-week closing high of 3p in January 2017.
As of 1.00pm London time shares in LGO Energy (LON:LGO) were down 3.2 percent, Ascent Resources (LON:AST) down 1.3 percent and 88 Energy (LON:88E) were flat.