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United Oil & Gas (UOG) Shares Plunged 13.8% on H2 Update. Is It a Buy?

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Updated 27 Jul 2022

Key points:

  • The United Oil & Gas share price plunged 13.8% on the H2 trading update.
  • The oil company’s revenues fell slightly despite higher oil prices.
  • Investors focused on the negatives ignoring the positives.

The United Oil & Gas PLC (LON: UOG) share price plunged 13.8% after its half-year trading and operations update was released. However, the report was relatively positive as the company’s daily average oil production of 1,552 boepd was within its target range of 1,500-1,650 boepd.

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The oil and gas company reiterated its full-year production guidance of 1,500-1,650 boepd despite production lingering towards the lower end of the range. The group generated approximately $10 million in revenue during the first half, which was lower than last year’s $10.2 million figure.

Also read: A Trader's Guide To Energy Trading And Investing.

Investors’ adverse reaction could be attributed to the lower revenues or production numbers at the lower end of UOG’s annual production target. The company could have earned lower revenues were it not for the higher realised oil prices of $105.5/bbl compared to $63.1/bbl compared to H1 2021.

United Oil’s cash balance at the end of the six months was about $3.8 million, a significant improvement from its $2 million balance at the end of H1 2021. In addition, the company expects to spend $7.2 million on capital expenditures this year.

Some of the operational highlights in the report included the ASD-2 well starting operations at the end of March after drilling operations encountered 25 metres of net pay. However, investors might have singled out the lack of oil at the ASV-1X exploration well.

UOG said that it started drilling its third exploration well at the Al Jahraa field at the end of June, putting it right in the middle of its 2022 drilling campaign, which targets the drilling of five wells. Another significant report highlight was the zero lost time incident frequency and fatal accident rate.

However, all the positive highlights in the report could not save UOG shares from the negative investor sentiment. Investors are pricing in the lower oil prices in H2 2022, which could translate to lower revenues for United Oil & Gas.

So, should you buy UOG shares? Given today’s decline, I would refrain from buying until we got a series of green daily candles.

*This is not investment advice. Always do your due diligence before making investment decisions.

UOG share price.

United Oil & Gas share price 27-07-2022
Source: Tradingview

United Oil & Gas (UOG) shares plunged 13.8% to trade at 1.81p, falling from Tuesday’s closing price of 2.10p.