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Why Aurora Oil & Gas shares are down 15%

It hasn’t been the strongest month for shares of some of Australia’s oil and gas exploration and production companies. Granted, a month is but a blink of an eye for a long-term investor, but it’s still important to understand the cause behind a short-term downward trend.

Take Aurora Oil & Gas Limited (ASX: AUT). Its shares are down some 15% since early March. What’s happened to this hotshot E&P, once a darling of fund managers?

It seems likely Aurora’s investors were hoping for more from the company’s 2013 guidance, issued March 27. The company forecast cumulative annual production range at roughly double 2012 levels with “an increase in its anticipated well count for 2013, with 45-50 net wells expected to spud on its Eagle Ford assets, representing a 25-30% increase over the 4th quarter 2012 guidance”. In all, Aurora pointed to heavily back-weighted year, with the majority of development and drilling taking place in the third and fourth quarters of 2013. It doesn’t seem to have been enough to keep Mr. Market excited.

Shares of Tap Oil Limited (ASX: TAP) have also fallen in the last month, by some 8%, and are now trading near a 52-week low. This is despite the company’s strong cash position of nearly $100 million and Tap having secured debt facilities for the development of the Manora oil field in the Gulf of Thailand. The company also has contract revenues of some $30 million a year for the next two years. All while, the share price keep getting cheaper, making TAP even more intriguing as a deep value play.

Interested in ASX oil and gas investments? Get three top analyst recommendations — including names, codes and a full analysis — in The Motley Fool’s brand-new FREE research report, “3 Oil Stocks to Send Your Portfolio Gushing Higher”.

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Catherine Baab-Muguira does not own shares in any of the companies mentioned in this article.

 

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