Oil and gas producers have been on a stellar run over the past 6 months. OPEC’s reluctance to meaningfully increase production has seen oil prices recently hit 7-year highs, whilst natural gas prices have soared to levels not seen since 2005 in the UK.
Tanzanian natural gas producer Wentworth Resources has witnessed its share price languish since the start of 2021, whilst many of its peers have produced notable gains. This may be due to the nature of the company’s long-term fixed price contracts with the Tanzanian government, which limits its exposure to current spot prices.
However, with Wentworth Resources’ gas production increasing at a time of soaring natural gas prices, this should lead to much more favourable contracts in the future. Could Wentworth offer a unique opportunity in the Oil & Gas industry that the market has simply overlooked?
The company is attractively valued based on forward estimates for the coming years and is one of the highest dividend yielding companies on the UK market at this moment in time. A cash pile equivalent to just under half the current market capitalisation is equally enticing, but there are undoubtedly a multitude of risks to be wary of when investing in a Tanzanian micro cap natural gas producing company. Not least the fact that a lack of liquidity means shares are hard to sell in a hurry.
Wentworth Resources was pitched to the Stockopedia Investment Club on the 5th October 2021 at a share price of 22.5p.
Profile
About the Stock:
Wentworth Resources (LON:WEN) is a UK headquartered company operating in the energy sector as a natural gas producer in Tanzania. Its shares are listed on the UK Alternative Investment Market (AIM) and are currently trading at 23.8p, giving a total market capitalisation of just under £43 million.
An Exchange Market Size of 7,500 means that liquidity might be an issue, as could be expected with a micro cap. The spread is also quite large though at 870bps.
From a fundamental perspective, Wentworth currently boasts a StockRank of 93, with strong Value (91) and Momentum Ranks (82) in particular. The 12m forecast PE is 9.8, whilst the 12m forecast dividend yield is a staggering 7.77%.
About the Opportunity:
Wentworth Resources offers…