Empire Oil and Gas (ASX: EGO) - Small Cap Resource Stock Trade Recommendation

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Empire Oil and Fuel (ASX: EGO)  engages in the exploration, growth and creation of oil and fuel in the Perth, Carnarvon and Canning Basins in Western Australia, has rocketed 43.08% about the last month  on discovery of significant hydrocarbon reserves in its Red Gully prospect positioned in the Perth basin.

A drill report issued by EGO indicated that at a depth of 3529-3585m "a very substantial gas charged interval of [sandstones]" is current, which, in accordance to conservative business estimates could equate to opportunity recoverable resources of 40.seven-58.7 billion cubic feet of gasoline and two-3 million barrels of condensate. Accordingly, a get of this magnitude, the moment accounting for reserve adjustment elements and extended expression price trends, could be valued in between US$245 million and US$375 million. EGO's intraday market capitalisation stands at just more than AU$61.46 million.

 

Empire Oil and Gas is now negotiating fees and tariffs for the use of the Parmelia or Dampier to Bunbury Nationwide Gas pipelines, which are positioned 2.4km from the Gingin West reserves. EGO aims to build a gas and condensate plant able of processing 10MMcfd of fuel and 500bdp of condensate with the provision for an addition train to improve potential to 20MMcfd and 1000bpd. Presented EGO's small sector capitalisation, magnitude of its potential reserves, and its near proximity to other bigger gamers such as ARC Power, Origin Energy, ROC Oil, Royal Dutch Shell and PetroChina, who have constructed considerable infrastructure in the region, a takeover by a bigger player is particularly likely if not imminent.

Browsing at modern stock rate trends, EGO has not long ago broken out to the upside of a shed selection buying and selling pattern to close at $.016. The former weighty resistance at $.015 really should now act as robust support and as these, we advocate that traders with no exposure to EGO to Acquire on any respected retest of the $.015 help stage. For investors with current coverage, we highly recommend selling up to 50% of holdings at $.022 granted any evidence of declining momentum or for these with small phrase investing timeframes. For extended term publicity, we would advise that traders target the all time high of $.030. If reserves are tested probable, then we would advocate targeting a reasonable appeal of around $.052.

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