Offshore Oil and Gas: Only For the Bravest

John Robertson


Offshore oil and gas is especially dangerous investment ground. I highlighted Pura Vida Energy a year ago as being “among the best of the smaller companies in this space” ((VIEW LINK). My comments also highlighted the binary nature of its potential exploration outcomes which implied the company should only be a part of a well diversified portfolio for only the most risk friendly investors. After a long wait, the drill results from offshore Morocco came in. The result: no trace of oil where it should have been and a precipitous loss of market value. PVD has other arrows in its quiver off the coasts of Gabon and Madagascar but an offshore hole can cost hundreds of millions of dollars. Any drilling will have to be with partners who will heavily dilute existing shareholders. Some companies with similar experiences have been able to rehabilitate themselves but, with many months or even years before a hole is spudded, the test of investor patience can be intense. Offshore oil and gas is best left to the companies with the deepest pockets.

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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