Groundhog Day in London as oil stock soars on North Sea reserves

By Joe Easton and Ashita Chawla on 10/12/2017

LONDON (Bloomberg) -- Shares of Independent Oil & Gas Plc rose as much as 100% on Thursday, the second dramatic increase for a North Sea explorer this week, after the London-based company announced a tenfold increase in its southern North Sea gas reserves.

IOG said the portfolio holds an estimated 303 Bcfg, up from 34 Bcfg previously. The rally followed peer Jersey Oil & Gas Plc’s sixfold increase Monday, after joint venture partner Statoil ASA announced a discovery in the UK Continental Shelf region.

The share moves highlight the difficulty in valuing stocks listed on London’s resource-sector heavy Alternative Investment Market for growth companies, according to Arden Partners analyst Daniel Slater, who covers both companies.

“When it’s exploration, there’s quite a lot of risk involved and you don’t know if it’s going to work or not,” Slater said by phone. “You’re normally expecting it not to work, essentially, but you’re hoping it will.”

London’s AIM, known for higher levels of volatility than the main segment, and thus greater returns, has a large following among retail traders. Several unconfirmed Twitter users celebrated the share moves.

“These companies show that there is an awful lot of opportunity for small, nimble companies to still make discoveries and develop projects that will make money,” Slater said. “They might not be very material for a Shell or a BP, but they’re very material for a Jersey Oil or an IOG.”

Initial discovery test results are not always guaranteed. The so-called Gatwick Gusher find, owned by companies including UK Oil & Gas Investments Plc, was estimated to hold about 271 MMbbl per mi2 in June 2015, but those forecasts have since been questioned.

The announcement from IOG will likely allow it to attract further funding and development partners going forward, Slater added, maintaining his buy rating on the stock and putting his 60 pence a share price target under review.

IOG shares were up 66% to 26.50 pence a share at 4 p.m. in London.

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