Global Petroleum (LON: GBX) shares are down 40%. On the basis that GBX just announced that it’s not really got any money, quite possibly doesn’t have a future and, also, there’s no interest in their asset. Which, well, you know, is a pretty dire set of circumstances for a company. The real problem here is that there’s an asset in there. Which Global thinks is worth money. But no one else really seems to agree with them that it is worth money. Therefore - and this is the way that markets work - it’s probably not worth anything. Or anything worth very much. For that market insistence is that something is worth only what someone is willing to pay for it.
The current fiscal position: “Loss after tax US$1,283,634 (2022: loss US$1,647,094) reflecting ongoing exploration expenditure in Namibia; Cash balance at year end US$356,389 (30 June 2022: US$1,139,775), and US$376,000 at 23 October 2023, reflecting the equity raise in August 2023; Costs and overheads minimised with all Directors now waiving salaries/fees; Equity raise of £250,000 gross proceeds in August 2023, following confirmation of entering the First Renewal Period by the Namibian authorities, regarded as disappointing by the Company.”
So, they’ve a few months, at most, of expenses in the kitty. This after they’ve had a “disappointing” fundraise. They need to raise more, obviously, but currently they’re valued at £900k. Meaning a fund raise would have to be horribly dilutive to change this picture.
Global Petroleum share price from Google Finance
The real and underlying problem comes from this: “ The Company believes that the Walvis Basin, where PEL0094 is situated, has the potential to be extremely successful, and has the advantage of much shallower water depths generally than the discoveries in the Orange Basin; Global has continued its efforts to farm-out an interest in the Licence. As the Company anticipated, following the discoveries potential farminees have first looked for possible opportunities in the Orange Basin;”
Global believes that its license is valuable. No one’s willing to spend the money on the farm in - this means that someone else carries the expense of the drilling in return for a share of any profits - so that means that no one else actually agrees. Therefore the license isn’t valuable, for the value of something is what someone will pay. If that’s zero, well, that’s zero then.
We’d not expect Global Petroleum to be around for that much longer if we’re honest. Yes, things can change but this doesn’t look good.