Chariot Oil and gas disappoints investors on Nimrod prospect well but all the signs were there…

Well, yet another case this morning of certain larger investors appearing to have a head start over long suffering private investors. This time it’s with Namibia focused Chariot Oil and Gas. Just when is the FSA going to clamp down on this patent insider trading?

Last Tuesday the share price dropped heavily, from around 122p down to 92p on significant volume. At midday, the company issued an RNS that they knew no reason for the share price drop and that the Kabeliou (2714/6-1) exploration well was still not at target depth and the shares promptly rebounded back over £1. But, someone was clearly in the know as the pressure downward was largely incessant throughout the remainder of the week, again on relatively heavy volume apart from a bounce on Friday, where it rose 4.5% to 98p. In hindsight this was the last chance to get out before the latest devastating news. Suspicious is all I can say! There had to be some reason someone was dumping with such gusto and managment have some questions to answer rearding the “No reason” RNS in our opinion.

Today the company issued the duster RNS. AIM Oil and gGas has had its fair share of these over the last few weeks and, as Red Emperor investors know, the market is in no mood for forgiveness at the moment when a good hydrocarbon result is lacking.

Here’s the RNS in all its glory (not) –

The Kabeljou (2714/6-1) exploration well in Southern Block 2714A in the Orange basin offshore Namibia has reached a total depth of 3,150 metres TVDss and logging operations were conducted over the weekend. The well was drilled by the Ocean Rig Poseidon drill ship.

Preliminary logging results indicate that no commercial hydrocarbons were found and the well will be plugged and abandoned. All pre-drill reservoir targets were evaluated. The well intersected the Nimrod delta as planned, although the reservoir was less developed than anticipated at this location. A comprehensive evaluation programme was conducted to further understand the stratigraphy, lithology and the nature of the formation fluids in this remote area. Detailed analyses will now be undertaken on the data collected and this information will be used to calibrate the existing data set. A resource update of the remaining prospectivity in the block will be provided once this evaluation has been completed.

As they say, “let the trend be your friend” when you see so much downward pressure. Wild cat drilling is a risky business and today’s news seems to reinforce previous experience that that many rig crews are not adept at keeping their mouths shut particularly when the big institutional investors are sniffing around.

For investors in AIM oil and gas, the Borders Stebbing drill, Red Emperor/Range in Puntland and now Chariot in Namibia have illustrated the dangers of “all-in” investment in these type of frontier plays. Going in big time hoping for a positive result on a well with a 1 in 4 chance of success at best can be an excellent way to destroy your wealth – not for widows and orphans that’s for sure. My experience suggests that there’s always a chance to get in after a positive well result at a level that’s not super premium, look at Heritage, Gulf Keystone and Ophir Energy amongst others, which had a lag before a significant re-rating.

On the positive side, with 3 wells remaining in the company’s current drilling campaign it’s not curtains by any means and with BP and Petrobras on board, there is plenty of financial muscle backing Chariot. Let’s hope the company has better luck later in the year!

Not the finest hour yet again for AIM Oil after the sorry history of the likes of Desire Petroleum. 

Early indications are for an opening price around 40p!

Contrarian Investor UK