05 Feb Can you triple your money with UK Oil & Gas Investments plc and this small-cap peer?
In the last year the share price of UK Oil & Gas Investments plc (LSE: UKOG) has more than doubled. Investors are clearly becoming more positive about the company’s prospects, as well as the outlook for the wider oil and gas industry.
Looking ahead, it would be unsurprising for the company to continue its share price growth. However, alongside one of its smaller sector peers, could there be the opportunity for new investors to triple their money?
The smaller company in question is Trinity Exploration & Production (LSE: TRIN). The oil and gas exploration company that focuses on Trinidad and Tobago released an operational update on Monday which showed it continues to make progress with its strategy. In fact, it delivered a quarter-on-quarter increase in its average production volumes of 11%. This was achieved through the continued results of its low-cost high-return work programme of recompletions, workovers, reactivations and swabbing.
Looking ahead, there seems to be scope for a sustained production rate which is higher than the current level. Although a production rate above 3,000 bopd (barrels of oil per day) is not expected until later in 2018, there is nevertheless a clear upward trend when it comes to production levels. This could help to boost the company’s financial performance and aid investor sentiment.
Oil price potential
Clearly, the rising oil price is good news for explorers and producers across the oil and gas industry. It has now reached a four-year high of over $70 per barrel, and there could be scope for a higher oil price over the medium term.
While the prospects for the oil price are notoriously difficult to accurately predict and volatility may be high, the supply surplus which kept prices low in recent years now seems to have been eradicated. Cuts to supply from OPEC and non-OPEC nations may have helped, while continued growing demand could aid the price of black gold in future. This may cause investor sentiment towards oil and gas companies to improve in future years.
In addition, UK Oil & Gas could deliver positive news regarding its Horse Hill project. Although there has been some uncertainty regarding the potential production from its assets in the Weald Basin and West Sussex, they could provide the company with sustainably high production in the long run. And with it having interests in a number of different licenses across the UK, there is the potential for drilling success over the medium term.
However, the prospect of a trebling of its share price or that of Trinity may depend largely on the prospects for the oil price. If it remains buoyant and news flow from the two companies is positive, then investors in the two stocks could generate high returns over a sustained period. As such, they could be worth a closer look for less risk-averse investors for the long term.
High growth potential
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.