SEVERAL Africa-focused junior oil companies will go to the wall in 2020 and 2021 if they fail to get a grip on fixed costs, with the survivors eyeing a final shot at redemption from a potential oil price increase later this decade, before oil exploration becomes untenable. Eskil Jersing, a veteran of the continent's great oil and gas game, told delegates in a recent webinar organised by the Petroleum Exploration Society of Great Britain's Africa special interest group (SIG): "I think a lot of small caps will wither if they cannot find cover for their general and administrative (G&A) costs." Junior players are in cash preservation mode and have taken "major G&A haircuts", he said, such that, at a West Texas Intermediate oil price of $35, their market capitalisation is now closer to their core net asset value. These companies traditionally rely on working up exploration prospects to attract a well-financed farm-in partner to pay for exploration drilling, and then exiting before costly development spending is needed.
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