Neon Energy has abandoned a carefully crafted and hitherto well supported strategy in favour of a big bet on deep water drilling

John Robertson

PortfolioDirect

Neon Energy has abandoned a carefully crafted and hitherto well supported strategy in favour of a big bet on deep water drilling. Its market cap is down 95% to just half of what it is going to be paid for its US assets which were sold last week. The wheels fell off when drill results from offshore Vietnam were less exciting than the company had foreshadowed. Neon has successfully monetised its Californian properties but, in doing so, has raised additional doubts about its operating skills. Ironically, Neon now ends up funding better capitalised companies far more capable of withstanding the $20-30 million cost for an exploration hole. For a smaller business, the strategy is akin to a one-off bet on the roulette wheel. The risk/return balance which had attracted so many enthusiastic investors has been turned on its head.


John Robertson
John Robertson
PortfolioDirect

John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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