Is Falcon Oil & Gas (CVE:FO) In A Good Position To Invest In Growth?

Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, although Amazon.com made losses for many years after listing, if you had bought and held the shares since 1999, you would have made a fortune. Having said that, unprofitable companies are risky because they could potentially burn through all their cash and become distressed.

So, the natural question for Falcon Oil & Gas (CVE:FO) shareholders is whether they should be concerned by its rate of cash burn. For the purposes of this article, cash burn is the annual rate at which an unprofitable company spends cash to fund its growth; its negative free cash flow. Let's start with an examination of the business' cash, relative to its cash burn.

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How Long Is Falcon Oil & Gas' Cash Runway?

A company's cash runway is the amount of time it would take to burn through its cash reserves at its current cash burn rate. In March 2025, Falcon Oil & Gas had US$6.9m in cash, and was debt-free. In the last year, its cash burn was US$8.7m. So it had a cash runway of approximately 9 months from March 2025. That's quite a short cash runway, indicating the company must either reduce its annual cash burn or replenish its cash. The image below shows how its cash balance has been changing over the last few years.

View our latest analysis for Falcon Oil & Gas

How Is Falcon Oil & Gas' Cash Burn Changing Over Time?

Falcon Oil & Gas didn't record any revenue over the last year, indicating that it's an early stage company still developing its business. So while we can't look to sales to understand growth, we can look at how the cash burn is changing to understand how expenditure is trending over time. Given the length of the cash runway, we'd interpret the 28% reduction in cash burn, in twelve months, as prudent if not necessary for capital preservation. While the past is always worth studying, it is the future that matters most of all. So you might want to take a peek at how much the company is expected to grow in the next few years.

How Easily Can Falcon Oil & Gas Raise Cash?

Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for Falcon Oil & Gas to raise more cash in the future. Companies can raise capital through either debt or equity. Many companies end up issuing new shares to fund future growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

Falcon Oil & Gas' cash burn of US$8.7m is about 9.4% of its US$93m market capitalisation. Given that is a rather small percentage, it would probably be really easy for the company to fund another year's growth by issuing some new shares to investors, or even by taking out a loan.

So, Should We Worry About Falcon Oil & Gas' Cash Burn?

Even though its cash runway makes us a little nervous, we are compelled to mention that we thought Falcon Oil & Gas' cash burn relative to its market cap was relatively promising. Even though we don't think it has a problem with its cash burn, the analysis we've done in this article does suggest that shareholders should give some careful thought to the potential cost of raising more money in the future. Separately, we looked at different risks affecting the company and spotted 4 warning signs for Falcon Oil & Gas (of which 3 make us uncomfortable!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies, and this list of stocks growth stocks (according to analyst forecasts)

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.