MENU

Why the Galilee Energy share price is up 323% in 2018

One of the worst performers on the Australian share market on Wednesday has been the Galilee Energy Ltd (ASX: GLL) share price.

In afternoon trade the oil and gas exploration and production company’s shares are down 10% to 55 cents after it announced a $13 million placement to a new cornerstone investor and new and existing institutional and sophisticated investors at a price of 60 cents per share.

Management advised that the proceeds of the placement will be used on its forward exploration programme, specifically “to commence securing a rig and ordering long lead items in what is becoming a very tight market for both rigs and services, in addition to bolstering working capital.”

Ultimately the major objective of the programme is to expand its knowledge of the Glenaras Project and progress its goal of converting a large portion of the project’s Contingent Resource into Reserves as quickly as possible.

While a 10% decline today is disappointing for short term shareholders, those that have been holding Galilee Energy’s shares since the start of the year won’t mind so much.

Even after today’s decline, since the start of 2018 the Galilee Energy share price has gained a remarkable 323%.

Why has the Galilee Energy share price more than quadrupled this year?

The catalyst for this gain is the enormous promise of its Glenaras Project in the Galilee Basin in Queensland.

According to the AFR, the basin is estimated to hold more than 8000 petajoules of gas resources, which is approximately 15x the annual east coast domestic gas consumption.

And while at this point the gas remains commercially unproven and stranded from the east coast gas grid network, management believes the Jemena pipeline option provides it with a clear path to market.

The company’s managing director certainly knows what he’s talking about. He was formerly in charge of Eastern Star Gas which was sold to Santos Ltd (ASX: STO) for $900 million after booking 1520 PJ 2P reserve.

Should you invest?

Given the potential of this project and the growing demand for supply on the east coast, Galilee Energy is one to watch in my opinion.

However, unless you have a high tolerance for risk, I would suggest you stick with the bigger players such as Beach Energy Ltd (ASX: BPT) and Oil Search Limited (ASX: OSH) if you want exposure to oil and gas.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!