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Market Sentiment Around Loss-Making Europa Oil & Gas (Holdings) plc (LON:EOG)

Simply Wall St

Europa Oil & Gas (Holdings) plc’s (LON:EOG): Europa Oil & Gas (Holdings) plc, together with its subsidiaries, engages in the exploration, development, and production of oil and gas properties in the United Kingdom and Ireland. On 31 July 2018, the UK£13m market-cap posted a loss of -UK£2.6m for its most recent financial year. The most pressing concern for investors is EOG’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for EOG.

See our latest analysis for Europa Oil & Gas (Holdings)

According to the industry analysts covering EOG, breakeven is near. They expect the company to post a final loss in 2019, before turning a profit of UK£300k in 2020. EOG is therefore projected to breakeven around a few months from now. What rate will EOG have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 136%, which is rather optimistic! If this rate turns out to be too aggressive, EOG may become profitable much later than analysts predict.

AIM:EOG Past and Future Earnings, February 26th 2019

Given this is a high-level overview, I won’t go into details of EOG’s upcoming projects, however, take into account that generally oil and gas companies, depending on the stage of operation and resource produced, have irregular periods of cash flow. This means that a high growth rate is not unusual, especially if the company is currently in an investment period.

Before I wrap up, there’s one aspect worth mentioning. EOG currently has no debt on its balance sheet, which is rare for a loss-making oil and gas company, which usually has a high level of debt relative to its equity. This means that EOG has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are too many aspects of EOG to cover in one brief article, but the key fundamentals for the company can all be found in one place – EOG’s company page on Simply Wall St. I’ve also put together a list of key aspects you should look at:

  1. Historical Track Record: What has EOG’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Europa Oil & Gas (Holdings)’s board and the CEO’s back ground.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.