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Countdown for Chariot

The oil exploration company starts drilling next month in Namibia and continues to seek a farm-in partner
September 14, 2018

Shares in Aim-traded Chariot Oil & Gas (CHAR:9p), a £33m market cap oil exploration company with activities in Morocco, Namibia and Brazil, were unmoved post its interim results.

That’s because all eyes are on the drilling programme on Prospect-S in Namibia (prospective resources of 459m barrels and probability of geologic success of 29 per cent) which starts in mid-October with a likely drilling time of 35 to 40 days.

Chariot has a 65 per cent working interest and is fully funded, but is seeking a farm-in partner (for its Central Blocks in Namibia) to lay-off some of its net cost exposure on the Prospect S drilling (gross cost of around $20m to $25m). Without a farm-in partner then analysts at finnCap predict Chariot will have net cash on its balance sheet of $12m (£9.2m) at the year-end. That is not enough to fund another well on its current acreage.

The stakes are high as finnCap values Prospect S at 24p a share on a risked basis, or almost three times Chariot’s share price, and 180p a share on an unrisked basis. If Chariot hits pay dirt or attracts a farm-in partner, it could be transformational.

2017 Bargain shares portfolio performance
Company nameTIDMOpening offer price on 03.02.17 (p)Latest bid price on 12.09.18 (p)DividendsTotal return (%)
Kape TechnologiesKAPE47.91300171.4
BATM Advanced CommunicationsBVC19.25400107.8
Chariot Oil & Gas (see note one)CHAR8.298.8070.6
Cenkos Securities (see note two)CNKS88.4251069.530.6
Manchester & London Investment Trust (see note three)MNL291.653773.028.4
H&T HAT289.7530815.811.8
Avingtrans AVG2002154.79.9
Bowleven (see note four)BLVN28.929.1508.8
Management Consulting Group (see note five)MMC6.18360-3.0
Tiso Blackstar Group (see note six)TBG5515.40.54-71.0
Average    36.5
Deutsche Bank FTSE All-share tracker (XASX) 409412.5532.828.9
Notes:      
1. Simon Thompson advised selling two-thirds of the Chariot Oil & Gas holding at 17.5p on 3 April 2017 ('Bargain shares on a tear', 3 April 2017). Return reflects the profit booked on this sale. Simon subsequently advised using some of the proceeds from the share sale to participate in the one-for-8 open offer at 13p a share in March 2018 which is taken into account in the total return ('On the earnings beat', 5 Mar 2018).
2. Simon Thompson advised selling the Cenkos Securities holding at 106p on 3 April 2017 ('A profitable earnings beat', 3 Apr 2017).
3. Manchester and London Investment Trust paid total dividends of 3p a share on 2 May 2017. Simon Thompson then advised selling half of the holding at 366.25p on 26 June 2017 ('Top slicing and running profits', 26 June 2017), and selling the remaining half at 377p ('Bargain shares second chance', 17 August 2017).
4. Simon Thompson advised banking profits on half your holdings in Bowleven shares at 33.75p, and running the balance ahead of drilling news at the Etinde prospect in Cameroon in the second quarter of 2018 (‘Hitting pay dirt', 9 Apr 2018). The total return reflects this share sale.
5. Simon Thompson advised to sell Management Consulting's shares at 6p in February 2018 (‘How the 2017 Bargain share portfolio fared’, 2 February 2018).
6. Tiso Blackstar has transferred its UK listing to the Johanesburg Stock Exchange. Price quoted is sterling equivalent bid price at current exchange rates. 
Source: London Stock Exchange share prices.

I first advised buying Chariot’s shares at 8.29p in my 2017 Bargain Shares Portfolio, top-slicing two-thirds at 17.5p ('Bargain Shares on a tear', 3 April 2017), participating in the one-for-eight open offer at 13p on the balance (On the earnings beat’, 5 Mar 2018), and last recommended running your 70 per cent profit on the investment around the current price (‘Strategic acquisitions’, 9 May 2018). Ahead of drilling in Namibia, I maintain that advice. Run profits.

■ Simon Thompson's new book Successful Stock Picking Strategies can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 to place an order. It is being sold through no other source and is priced at £16.95 plus £2.95 postage and packaging. Simon's second book Stock Picking for Profit has been reprinted and is available to purchase online at www.ypdbooks.com for £16.95, plus £2.95 postage and packaging, or by telephoning YPDBooks on 01904 431 213 to place an order. Details of the content of both books can be viewed on www.ypdbooks.com.