Oil is having a moment – particularly in the US as hurricane Ida drives up demand for oil and the general rebound from the pandemic increases demand for the supply chain strapped sector. While oil has seen increasing volatility, the demand for oil is unlikely to dissipate in the immediate future. For this reason, two oil penny stocks are gaining traction in the OTC: CGX Energy Inc. (OTC: CGXEF) and Allied Energy Corp (OTC: AGYP).
CGXEF is one of the relatively undiscovered oil penny stocks despite its unique niche in the Guyanan oil fields. Situated adjacent to Venezuela, Guyana and Suriname are two countries that have seen action from major oil companies like ExxonMobil, TotalEnergies, and APA Corp’s. While many investors have never heard of this tiny South American country, Guyana was home to 9 billions barrels of recoverable oil and has since become a hotspot for oil. The country’s economy was initially spurred into growth thanks to efforts from the IMF and World Bank, but has become one of the fastest growing economies in the world after Exxon’s offshore oil finds in the 2010’s. Now its GDP is expected to more than double by 2025 as the economic footprint of these major oil companies further drives economic growth.
On August 223rd, CGXEF announced it has recently spud its offshore Kawa-1 exploration well with support from its joint venture partner Frontera Energy (OTC: FECCF). The joint venture has already exercised its option to drill a second well, showing their confidence in the operation. Kawa-1 is expected to reach its total depth by December but the decision for the second well’s timing will be determined “in the upcoming months”.
The company has numerous lease sites and work is already taking place on a 50 year lease site at the mouth of the Berbice River. In October 2020, CGXEF’s subsidiary began work on the deep water port project which has accrued notable expenses after the company awarded contracts worth $2 million in April 2021. Given the prosperous economic outlook for Guyana, the port has perhaps less risk in terms of ROI than the company’s offshore drilling since the port will likely become a major entry point for the country’s goods and services.
Having drilled three exploration wells already with two more in the works, CGXEF’s expensive projects are being fronted by Frontera Energy (OTC: FECCF) as the companies await proof of oil. But only one oil discovery is necessary to de-risk CGXEF’s over 30 prospects on the Guyana acreage. Considering the “penny stock” size of both of these companies, its unlikely that they intend to continue operations after discovering oil. It is more likely that CGXEF will look for a buyout or merger with an oil company in the region. In light of the area’s incredible oil output, it is possible that CGXEF could strike it rich but whether a major company decides to buy them out to obtain a lease that was previously overlooked is another matter.
Meanwhile AGYP has a mission “to revive resources using sustainable systems” and “treasure the planet by building our company a better way”. This oil exploration company has had two positive trading days, making marginal gains since August 30th. The company has continued steadily developing its two sites – the Green Lease site and Annie Gilmer – since its last update on the surface hole drilling.
The company selected the Annie Gilmer site due to its historically high production of 500,000 barrels of high gravity oil and over 500,000,000 cubic feet of rich natural gas. With the last well drilled in 1989, the site fell out of activity until AGYP renewed activity on the 300 acres site. For now, there are two saltwater injection wells on the lease but one will likely be converted. Meanwhile the Green Lease site has an acreage of 890 and promising geography owing to its mixed lithology and fracture-prone reservoirs which were likely overlooked. In the past, the fracture limestone reservoirs were not treated differently from conventional sands due to a lack of industry knowledge. Now AGYP hopes to take advantage of technological progress to capitalize on potentially overlooked reserves.
AGYP acquired majority ownership of both sites as recently as March 2021, and has successfully conducted an evaluation of both sites’ oil and gas reserves. Employing petroleum engineer Mark McBryde to undertake the evaluation using the conservative market price of $46.26 per barrel, AGYP released the results last month. McBryde reported $2,944,900 of proved oil and $18,536,600 of probable and possible oil at the Green Lease site. While he reported the Annie Gilmer Site holds $6,704,900 in proved oil and gas reserves with $5,489,900 in probable and possible reserves.
Penny stock investor legend, @timothysykes, shared one of these oil penny stocks along with his new watchlist.
CGX Energy Inc.
Trading at $1.59, CGXEF has shown some volatility in the last few weeks. The immediate support is at 1.52 with a secondary support at 1.46. Its resistance appears much farther up at 1.7. After sloping downwards the last few days, the stock is showing an uptick mirrored by its accumulation. RSI is downtrending at 55.83 possibly indicating the stock’s sloping tendency. But the MACD is heading to the upside after a crossover at market close yesterday.
CGXEF has yet to make a profit and is largely supported by Frontera Energy in its expensive offshore drilling operations.
Allied Energy Corp.
AGYP appears to be continuing its progress from the last two days. Trading at $.30, the stock has a support of .2861 and has passed a previous resistance at .29. Its next resistance point appears at .3082 and .3188. Accumulation has remained low but is trending upwards, with RSI moving upwards from 54.27. The MACD had a near convergence earlier today but the signal lines diverged with the MACD heading towards the upside.
Due to the company’s lengthy operations, AGYP has accumulated a deficit of $4,022,601 and convertible notes payable totaling $2,784,763 and $2,124,973, respectively.
Should you Buy?
Oil is a risky, volatile sector for investment – especially for these oil penny stocks. However it is also a resource that will be needed for the foreseeable future. Given the various oil pressures across the US, AGYP has potential to become a domestic oil producing asset. However, a long journey awaits the company as it works towards production. Similarly, CGXEF has great potential considering its port development and location in the oil hotspot of Guyana. But like AGYP, the company is a long-term play considering the long lag between exploration drilling and production.
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