#AAOG Rumour, Rancour and Raisings

#AAOG Rumour, Rancour and Raisings

The share price isn’t where we want it to be. As I’ve said in previous blogs even at the current level I am well up, but for many that invested (that haven’t sold out), the current share price is down.

If we start with the Monday RNS. Although it was very good, particularly the size of the immediate producer R2, the mysterious size of the new sandstones and the size of Mengo. It did not contain any pressure values, porosity values or API details. David did confirm that these exist internally but have not yet been released. David did confirm that these are all good and meet expectations.

Releasing this information, or not releasing it, was obviously a conscious decision. But it does pose the question why not?

The lack of information did contribute to some of the decline to 12p, however the real damage was done by TW. Almost every company on AIM raises money, all that’s happened is that some idiot has told TW and he’s used this to generate clicks for his website, not really caring what damage he’s done in the process. There is no public interest in this. Its about the cesspit of AIM, that TW not only inhabits but actively feeds off.

Regardless of this I have spent the day, contacting Nomads, Brokers, AAOG, St Brides, nobody is prepared to confirm or deny or respond in anyway. This tells me that there is obviously some truth in it, but how much? Who knows.

So as an investor what do I do?

Well I have stuck to my strategy, not sold a single share. I can’t affect what is happening so I need to try and understand its effects.

If the rumour of a placing in incorrect then the share price will quickly recover. I am happy.

Of more concern is what will happen if the rumour is real and we have 4m being raised by issuing 40m shares at 10p.

To start with I would be pissed. Why so low?, why so much?, why now? 10p is a stupidly low price etc. etc.

Then I would start thinking…..

Why so low? If the raising was being organised back on say Wed/Thur then the share price was 12-13p for most of that time so a raising at 10p for another 20% of the company would, in the current market, be quite a good price.

Why so much? My opinion was that 1m was needed to finish the drill. Then the company could decide next steps. Although I personally like this approach. If the company only raises 1m, then in 4-5 weeks time we would start to get more false stories about fund raising, this would hold the share back. After talking to folks today a collateralised debt facility would only be on offer after flow testing. So a none share issue for at least an initial raise was off the table. If I am being honest with myself, the idea of the company having a raise, even if painful, that enables drilling to Vanji, Simulation of Mengo, flow testing, and to get the oil flowing to production is probably a good thing.

Why now? This has been partly answered above, but let’s think a bit more. If they raise prior Djeno, then if Djeno is an oil hit, the share price will be massive and a share placing at 10p will be largely ignored. If Djeno is a failure (not what I am expected), then having the money in the bank to fund production from Mengo will be considered a master stroke.

If they raise post Djeno with a hit then yes fund raising will be easy, the share price will greatly increase. If they raise post Djeno without a hit, then it will be less than 10p imho in the current climate.

Given a bit more thought, I am actually starting to understand why AAOG might want to raise now and why at 10p.

Moving on from the rumour back to reality.

The share hasn’t changed, the potential hasn’t changed, the effects of a Djeno or Vanji hit haven’t changed. There is still a huge amount of net pay and a very successful drill. Volume has been close to 100m over the last 5 days. If the placing goes ahead most of the shares look to have already hit the market. At 11-12p we haven’t seen what I would consider placing shares. 

Regardless of a placing my strategy is fine and unaffected. There are good and bad points for any decision and I am happy with those. TW’s great expose is really irrelevant for most. Even with a placing, even with a Djeno miss, the money would provide enough production from the discovered net pay to give an SP higher than anybody has brought recently.