Baron Oil Plc (LSE:BOIL) is an early-stage oil and gas exploration company. With a market capitalisation of around £18m, the Baron Oil share price is currently trading close to 0.1p.

The firm is currently in a strong position to deliver value to shareholders. At least, that’s the impression I’m getting. Two of its major projects are moving through key evaluation points. At the same time, the oil & gas sector’s tailwinds of energy security, structural imbalances in LNG, and historically high gas prices are operating in favour of the company.

By seeking high-potential impact exploration and appraisal opportunities at significant equity in proven hydrocarbon basins, I believe the company is en route toward growth. As it stands, the group is not generating profits right now. But that doesn’t mean it can’t change in the long run.

With that in mind, let’s discuss more about the company’s financials and stock performance. And whether baron oil price has the potential to surge in the long run.

Key Points

• The company is not generating profits right now.
• Two of its major projects are moving through key evaluation points.
• The company has zero debt and a reported cash reserve of £2.4m.

What does Baron Oil do?

Baron Oil is an independent oil and gas exploration company incorporated. It is listed in the United Kingdom on the Alternative Investment Market (AIM) of the London Stock Exchange.

Baron Oil didn’t record any revenue last year, indicating that it’s an early-stage company still developing its business. For a company like this, the cash runway is an excellent metric to help identify the future growth pattern. And according to its financials, it has a cash runway of around 14 months as of June 2022.

The company has zero debt and reported cash reserves of £2.4 million, a 43.3% increase within six months. That’s pretty rare for an exploration company. While the company is utilising its cash for its operations, the increase in cash reserves is a healthy sign and positive news for investors.

The bull case for the Baron Oil share price

In the past two years, the stock of the oil company picked up its bearish stance in July 2022. From a price of 0.067p at the start of July 2022, the stock shot high in October 2022 to 0.24p – a 258% increase.

The stock pulled back after this price hike. But then again rose high from 0.135p to 0.23, representing a 70% price hike.

Overall, the stock maintained its bullish stance from July 2022 to February 2023, with an overall 243% stock price appreciation.

Most of this momentum stemmed from encouraging announcements of its financial results. And while the company is still in the early exploration stage of its lifecycle, fundraising efforts have proven more successful than initially anticipated. It seems investors, in general, have a high degree of confidence at the moment.

The bear case for the Baron Oil share price

The bearish cycle returns post the bullish run. After hitting a high of 0.23p, the stock started its bearish journey. From the peak of 0.23p, the stock has been declining till date. The Baron oil stock price last closed at 0.095p, representing a 58.7% decline to date.

Despite seemingly strong confidence, this company still has a long road ahead. And it’s not uncommon for investors to jump ship in small businesses after enjoying a short-term surge.

Testing from its Chuditch PSC site returned promising results. But it could be years before extraction can commence, with the first production anticipated in 2028. And as a pre-revenue enterprise, the Baron Oil share price is likely to be highly volatile in the meantime, especially if unwanted surprises appear.

Baron Oil share price prediction

As a small business, Baron Oil doesn’t get a lot of attention from many stock market analysts. However, looking at the current consensus forecast, most analysts have placed a Baron Oil share price prediction for 2023 between 0.07p and 0.1p.

Based on today’s share price, the stock currently sits near the top of analyst expectations.

Should I buy Baron Oil shares today?

Baron Oil also has a healthy cash position, despite not generating profits. At least, that’s what I think. While this situation cannot persist indefinitely, the remarkable development in the company’s key projects is a healthy sign of progress.

Moreover, the relinquishment of its legacy Peru Licence Block XXI in June, along with the release and successful return of its $160,000 Bank Guarantee, has further secured my confidence in this company’s future growth.

While I am not so confident about Baron Oil’s share price surging in the near future, I believe this stock has some excellent long-term potential.

Given the size of the business, another flood of good news could more than likely send the Baron Oil stock price flying. But it’s important to remember that the opposite is also true. For now, I’m keeping this stock on my watchlist, but I will be keeping a close eye on it.

Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.