Maverick Drilling & Exploration (ASX: MAD) has traded below StockAnalysis’ pullback target of 70 cents and has effectively fallen by the Fibonacci 62.1% of its rise from 23 cents to $1.47. Despite its claimed 1P oil reserves of 101 mmbbls, which ordinarily would support a value of over $2.50 per share, there appears to be forces at work on the share price which are not well understood. Maverick saw huge volatility last year as its share price moved 21% in a day on 27th of December. Selling by one Director also did not help the situation, with a likely margin call putting downward pressure on the stock. As mentioned by the company, there are derivatives held over stock which are not disclosed, on top of which there has been active short selling of over 8 million shares. Sale by a Director may have been part of the derivative based selling or margin call, or it could have been a forced sale to raise cash for some other reason. The true nature of this sale is unresolved, even though I am reassured that it was not part of any market related forced selling. Absent any further information about ongoing poor oil production performance or specific news of outstanding derivatives that could be triggered if the share price were to fall further, Maverick is beginning to look very attractive at a price below 70 cents. The problem for Maverick is that the market has not been kept fully informed by the company’s management, resulting in an emerging lack of trust, which will only be resolved with improved corporate governance. This might involve a new Chairman and possibly some additional movement to strengthen the Board. StockAnalysis is sure that there will be a few calculators being passed over the company’s numbers and should its share price remain below $1, a bid seems likely by midyear.
FDM Price at posting:
64.5¢ Sentiment: ST Buy Disclosure: Held
