19/03/2021 - 15:10

Warning for ASX-listed Jupiter Energy

19/03/2021 - 15:10

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A Kazakhstan-focused oil junior which had a 70-fold share price spike last April has been warned by its auditor it may struggle to meet financial obligations.

Warning for ASX-listed Jupiter Energy
The road to Jupiter's Block 31 permit area in Kazakhstan. Photo: Jupiter Energy

A Kazakhstan-focused oil junior which had a 70-fold share price spike last April has been warned by its auditor it may struggle to meet financial obligations.

ASX-listed Jupiter Energy raised eyebrows last year when its share price jumped from 0.2 cents per share to close at 15 cents per share just days later.

Shares briefly changed hands at 35 cents each.

Trading volumes of the stock rose from a few thousand units a day at the start of that week to be 10 million units a day.

The share price then dropped, but chief executive and chairman Geoff Gander sold all his stock over the period at an average price of 19 cents.

Mr Gander earned $167,000 from those trades.

Trading in Jupiter was suspended, and the company told the ASX the jump had been driven by social media activity and day traders.

Jupiter’s latest half-yearly report was released last week and showed a profit of $5.6 million.

But Jupiter’s auditor EY, which reviewed the accounts, said there was material uncertainty the business could continue as a going concern; a financial concept that refers to a business's ability to meet financial obligations.

EY noted it had reviewed the report, and it was "not an audit".

Jupiter has $US35 million of convertible notes due July 2022, and a total $US63 million of debt.

The report showed a total deficiency in equity of $64.5 million (Australian dollars), as assets were just $19.4 million (AUD).

That means shareholder equity was negative.

To have sufficient working capital, Jupiter would need: ongoing support from its creditors; to secure approvals to transition its oil fields from exploration to commercial production; and to obtain approval for flaring gas, the report said.

The directors claimed they were confident each of these things would be achieved.

For now, at least some of the company’s wells are operating under trial production licences, rather than commercial licences.

Production at one field was shut in for more than three months last year waiting for approvals.

The annual report also said the oil was sold to a single, unnamed Kazakh oil trader on a prepaid basis.

The implied price was about $US15 per barrel over the six months to December, according to figures in the report.

Jupiter’s directors include Baltabek Kuandykov and Alexander Kuzev, both of whom have long-term experience in the Kazakh oil industry.

Mr Kuandykov was formerly a deputy minister in the Kazakh government.

Another director is Alexey Kruzhkov, who Jupiter says is an executive of Waterford Finance and Investment, a Guernsey-based business that holds 21.7 per cent of Jupiter.

Jupiter moved its registered office from Perth to Melbourne last year.

The company did not respond to a request for comment.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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