Quick Note And An Update on Africa Oil Corp

   I am flying to Las Vegas today for a conference so posting will be light. I will be there over the weekend. But you will not see me at the blackjack tables--the market is enough for me.

   I sold my position in Africa Oil at the open. The company came out with a good press release yesterday which announced a farm-out agreement with Tullow Oil (the one that found 1 billion barrels in Uganda). Overall it was a good deal for Africa Oil and provides some legitimacy to their blocks in Kenya and Ethiopia. The market sure liked the deal sending the stock 20% higher. The reason I sold was because they postponed drilling in the Puntland region (Somalia)--again. This is going on 3+ years of delays. They keep saying they are going to drill, but always cancel at the last moment. As you probably know the only real value of this company is in its large acreage position in the Puntland where there is billion barrel potential. I am not terribly excited about Kenya or Ethiopia. At this point the company says they will drill a well sometime in 2011 (no definitive date). That is not good enough for me. Ex-Puntland this company is wildly overvalued with a market cap of around $220 million. I know the company website says 144 million shares, but if you look deeper its around 175 million fully diluted. So a $220 million market cap for an exploration company with no oil or natural gas is too rich for me. I will most likely get back into the name if it declines. Even though I made a profit on this transaction I am not very happy with this outcome. I really had my hopes on the Puntland.

Related Articles:
Investment in Africa Oil Corp.
Oil Prospects in Somalia

Black Swan Insights 


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