a bit of negative sentiment https://seekingalpha.com/article/1242561-i-told-you-so-these-5-stocks-have-more-downside-than-upside?source=yahoo
4) Africa Oil (AOIFF.PK): It was in early December 2012 when I posted an article about Africa Oil, and how overvalued this explorer was at $10.50. I did not short it, but it seems that I must short more often because the stock is at $7.2 today, just three months later. This is a 35% drop.
The company has negative operating cash flows and losses for two years now. The continuing erosion of the company's cash resources resulted in a dilutive placement in December 2012. This is how the company avoided borrowing money, and this is why it does not have any long-term debt currently. However, it does not have any revenue, and eventually the operating cash flow will remain negative in 2013. Despite all this, Africa Oil trades at PBV=3.
The latest news also confirmed my belief that the positive operating cash flow is years away. The elections in Kenya carries a significant potential for instability. The current period through the elections is rocky and volatile, and the outcome can even cause a trade embargo.
Additionally, the commercial production is finally slated for 2017 in the neighboring Uganda, after being delayed almost a decade by rows over tax and infrastructure projects. Kenya also needs significant infrastructure, taxation and legislative improvement to handle any oil proceeds. Will Kenya avoid such setbacks? On top of that, commercial reserves have not been proven yet in Kenya.
From an operational front, the results from the company's core wells are mixed. Ngamia-1 and Twinga-1 wells found oil, but the initial shows from Paipai-1 do not look very encouraging. However, the final results from Paipai-1 have not been released yet, and they will be out during the next weeks.