James Parsons; “Time for fresh ideas & bold moves”
While the oil market is at historical lows as the global economy struggles with a production cut that will eventually set prices rising again, AIM-listed Ascent are rolling the dice, setting up an ambitious international strategy, that could be a company maker.
Bold moves can pay off when made wisely. The world knows Cuba has a history like no other Caribbean island, it’s one of the richest underexplored and undeveloped hydrocarbon regions in the world. It is also the new target of junior oil & gas exploration company Ascent Resources (LON: AST)
Restructuring a company and redefining its strategy is far from easy in this market and a move like this one takes a lot of commitment and expertise. In Ascent Resources, a fresh team has arrived with the intention of shaking up the company: the board has an ambitious portfolio among the first items on their agenda. Chairman James Parsons has taken control and has appointed a CEO, announcing an international strategy. Destination Cuba.
A low oil price affects all countries and all companies, big or small. Major players like Shell and BP, have seen their share prices drop. For small caps, it is even more challenging. The fundamental rule of thumb is this: Generally, debt free, oil producing companies with solid balance sheets and viable projects survive to make a comeback in the market when it turns.
The old, tired Ascent legacy was a poorly performing company that lacked transparency, coupled with a history of failed promises and disappointments too many to mention here. Suffice it to say AST as a company had lost its credibility among its shareholders and in the market. Does James Parsons’ as Ascent’s new Executive Chairman, herald a new beginning? My answer to that is ‘Yes’
What investors/shareholders fail to understand about the oil and gas sector is this: At best regardless of what is postulated by the various analysts, brokers and financial commentators the chance of success (COS) is never better than a one in four. That is fact. Cold fact! The only way an oil company can prove up its asset is to drill it. The geology is built up over millions of years. It’s either there or it is not. As a shareholder the best you can expect from a CEO and the company is that they do what they say on the tin. They drill their licences exploring for petroleum. That is as good as it gets for shareholders. The icing on the cake is finding commercial oil/gas. Parsons took Sound Energy (LON: SOU) from 7p to over £1 he built value in his first venture. He did what he said he would.
Take a licence, fund it and drill it, is a feat of management way beyond the normal on the AIM. The geology failed. James Parsons did not. His bit part in other ventures such as Coro, Echo & Regency mines have yet to play out. Decisions are made collectively. One person isn’t responsible it is management who action. Demonising any individual for millions of years of geology, is laughable. As an investor so long as the company drills its licences in a timely fashion then that’s as good as it gets on the Alternative Investment Market. The opportunity to trade in or out during the E&P cycle.
The move to Ascent has been on the cards for a long time. Parsons is a deal maker: he has an eye for big opportunities, and he sees one in Cuba. One thing is certain, James Parsons will drill for oil in Cuba.
In a recent RNS, he commented: “Cuba is one of the last remaining largely untapped hydrocarbon provinces of scale. We see here that despite the recent market turmoil and oil price collapse, the unique ingredients are in place for a new, highly material growth trajectory across oil, gas and mining when the cycle turns. We also see near-term inflection points for Cuba, including the approaching US elections.
We are therefore positioning Ascent as an advantaged platform for counter cyclical acquisitive growth with a focus on low-cost production, manageable initial capital commitments and near-term re-rate potential.”
But it isn’t all about Cuba. Ascent still has its historical Slovenian gas assets. A relationship with the Slovenian government must be built and progressed to make sure that AST’s historical bread-and-butter assets can increase production.
The new Board has a proven history of drilling their licenses on time and on budget.
Cuba represents a new direction for AST & oil/gas investment in the UK. It’s a bold move that could bring rewards and is worth following. The upside could be immense.
Keep this on your radar and reassess in 6 months.