Key points:
- The TomCo Energy shares fell 3% as it extended its loan repayment date.
- The lender is having trouble securing new funding for its TSHII project.
- So should you buy TomCo Energy shares? Read on to find out.
The TomCo Energy Plc (LON: TOM) share price fell 3% after the oil development group announced the further extension of the repayment date for the $1.5 million loan advanced to its subsidiary Greenfield Energy LLC by Valkor Oil & Gas LLC on 16 November 2021.
Investors were unhappy that TomCo Energy was extending the repayment deadline for a second time as the first extension deadline of 30 June 2022 fast approached. Could the company be in financial problems, and are there further shocks that investors should be aware of?
Also read: A Trader's Guide To Energy Trading And Investing.
Companies that have problems repaying their debts usually tend to fall into further financial problems down the line. TomCo shares have fallen 33% since the year started and could be headed lower.
TomCo Energy also released its interim results for the six months ended 31 March 2022, where it acquired a 10% interest in Tar Sands Holdings II LLC (TSHII) and entered into multiple agreements with third parties as it seeks to enhance the TSHII’s value.
The company also raised £1.25 million on 24 January 2022 to fund the drilling of three exploration wells and to cover some of the short-term liabilities associated with Greenfield Energy’s operating costs. However, it is clear that for TomCo to repay Valkor’s loan, it might have to raise more money from investors, further diluting existing shareholders.
TomCo completed the drilling of the three wells after the six months ended, and the initial results met its expectations. However, the energy firm’s plans to repay the outstanding loan from Valkor are crucial since it has an exclusive option to acquire the remaining 90% interest in TSHII by December 2022.
The oil company said it was in discussions with a potential funder amid plans to acquire the 100% membership interest in TSHII by the above deadline. Securing the funds to acquire the remaining percentage and settle the Valkor loan should boost investor confidence in the oil firm.
So, should you buy TomCo Energy shares? The answer is you can if you are an aggressive investor. However, most investors would be better served to wait for the company to secure new funding before buying.
*This is not investment advice. Always do your due diligence before making investment decisions.
TomCo Energy share price.
The TomCo Energy share price plunged 2.78% to trade at 0.384p, falling from Monday’s closing price of 0.395p.